As filed with the Securities and Exchange Commission on March 16,September 9, 2016
Registration No. 333-______________333-210250
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-1S-1/A
(Amendment No. 3)
_______________
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOXIAN, INC.
(Exact name of registrant as specified in its charter)
_______________
Nevada |
| 7370 | 27-3729742 | ||
(State or other jurisdiction of | (Primary standard industrial | (I.R.S. employer |
Block A, 9/F, Union Plaza
5022 Binjiang Avenue
Futian District Shenzhen City, Guangdong Province, China
+86 (0)755-66803251
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
228 Park Ave South, #82217
New York, NY 10003
(U.S. correspondence address of registrant)
VCorp Services, LLC
25 Robert Pitt DrDr. #204,
Monsey, NY 10952
(845) 425-0077
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Mitchell S. NussbaumLawrence Venick_______________
Copies to: | ||
Mitchell S. Nussbaum, Esq. | Ralph V. De Martino, Esq. |
_______________
Tahra Wright
Loeb & Loeb LLP345 Park AvenueNew York, New York 10154(212) 407-4000Fax: (212) 937-3943
Approximate date of commencement of proposed sale to the public:As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company |
CALCULATION OF REGISTRATION FEE
Title of Each Class of Security Being Registered |
| Proposed Maximum Aggregate Offering Price(1) |
| Amount of Registration Fee(2) | |||
Common Stock, $0.001 par value |
| $ | 20,000,000 |
| $ | 2,014.00 |
|
Placement Agent Warrants(3) |
| $ | — |
| $ | — |
|
Common Stock Underlying Placement Agent Warrants(4) |
| $ | 800,000 |
| $ | 80.56 |
|
Total |
| $ | 20,800,000 |
| $ | 2,094.56 | (5) |
____________
Title of Each Class of Security Being Registered | Proposed Maximum Aggregate Offering Price(1)(2) | Amount of Registration Fee(3) | ||||||
Common Stock, $0.001 par value | $ | 57,500,000 | $ | 5,790.25 | ||||
Underwriter Warrants (4) | $ | - | $ | - | ||||
Common Stock Underlying Underwriter Warrants (5) | $ | 1,200,000 | $ | 120.84 | ||||
Total | $ | 58,700,000 | $ | 5,911.09 |
(1) Includes the aggregate offering price of Common Stock that may be issued upon exercise of a 60-day option granted to the underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) (2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price, including the offering price of warrants to be issued to the underwritersplacement agent and common stock underlying such warrants.
(4) (3) No fee is required pursuant to Rule 457(g) under the Securities Act. Resales of the underwriterplacement agent warrants on a delayed or continuous basis pursuant to Rule 415 under the Securities Act are registered herebyhereby.
(5) (4) Resales of shares of common stock issuable upon exercise of the underwriterplacement agent warrants on a delayed or continuous basis pursuant to Rule 415 under the Securities Act are also registered hereby.
(5) Previously paid.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Preliminary Prospectus dated March 16,September 9, 2016
MOXIAN, INC.
[●]MINIMUM OFFERING: 2,500,000 shares of common stock
MAXIMUM OFFERING: 5,000,000 shares of common stock
Moxian, Inc. is offering_______ a minimum of 2,500,000 shares of common stock, par value $0.001 per share. share, and a maximum of 5,000,000 shares of common stock. We currently expect the public offering price to be $4.00 per share of common stock. The offering is being made on a “best efforts” basis without a firm commitment by the placement agents, who have no obligation or commitment to purchase any of our shares. The placement agents must sell the minimum number of shares offered (2,500,000 shares of common stock), if any are sold, and are only required to use their best efforts to sell the shares offered. The offering will remain open through November 14, 2016. See “Plan of Distribution.”
On September 7, 2016, we entered into note conversion agreements with Shenzhen Bayi Consulting Co. Ltd. and Moxian China Limited. The note conversion agreements provide for the conversion of promissory notes in the aggregate amount of $2 million payable by us into shares of our common stock at the public offering price. On the date of this prospectus, the notes will automatically convert into shares of common stock at a conversion price equal to the public offering price per share being offered in this offering.
We are a reporting company under Section 13(a) of the Securities Exchange Act of 1934, as amended. Our common stock is currently quoted on the OTCQB Marketplace (the “OTCQB”) under the symbol “MOXC.” On[●], 2016, the last reported closing bid price of our common stock was $[●] per share. There is a limited public trading market for our common stock. We plan to applyhave applied to list our common stock on the NYSE MKTNASDAQ Capital Market under the symbol “MOXC.”
Investing in our securities involves a high degree of risk. You should carefully consider the risk factors beginning on page 67 of this prospectus before purchasing shares of our common stock.
|
| Price |
| Commission |
| Proceeds to | |||||
Minimum Offering (2,500,000 shares) |
| $ | 4.00 |
| $ | 0.16 | (2) |
| $ | 9,600,000 | (2) |
Maximum Offering (5,000,000 shares) |
| $ | 4.00 |
| $ | 0.22 | (2) |
| $ | 18,900,000 | (2) |
____________
(1) Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering, payable to Axiom Capital Management Inc., the representative of the placement agents. See “Plan of Distribution” beginning on page 62 of this prospectus for additional information regarding total placement agent compensation. It also does not include our expected cash expense for this offering to be approximately $0.5 million, exclusive of the above commissions.
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(2) We and the placement agents have agreed to pay commissions of 4.0% per share (or $0.16 per share) on the initial $10.0 million in offering proceeds and 7.0% per share (or $0.28 per share) on all additional amounts, which, assuming completion of the Maximum Offering, results in a combined commission rate of $0.22 per share.
In addition to the underwriting discounts andplacement agent commissions listed above and the non-accountable expense allowance described in the footnote, we have agreed to issue to [●]Axiom Capital Management Inc. warrants, exercisable commencing one year after180 days immediately following the effective date of effectiveness of the registration statement of which this prospectus forms a part and exercisableor the commencement of sales in this offering for a period of five years, thereafter, to purchase shares of common stock equal to 2%4% of the total number of shares sold in this offering but not including shares sold pursuant to the over-allotment option,and may be exercisable on a cashless basis at a per share price equal to 120% of the public offering price (the “Underwriters’“Placement Agent Warrants”). The registration statement of which this prospectus is a part also covers the Underwriters’Placement Agent. Warrants and the shares of Class A common stock issuable upon the exercise thereof. For additional information regarding our arrangement with the underwriters,placement agents, please see “Underwriting”“Plan of Distribution” beginning on page 54.62.
We have granted a 60-day option to the underwriters to purchase from us an additional [●]Until we sell at least of 2,500,000 shares of our common stock, all investor funds will be held in an escrow account at Continental Stock Transfer & Trust, New York, New York, as agent, for the benefit of the investors. If we do not sell at least 2,500,000 shares of common stock by November 14, 2016, all funds will be promptly returned to investors without interest or deduction. If we complete this offering, net proceeds will be promptly delivered to us on the closing date. Affiliates of the company and affiliates and associated persons of the placement agents may invest in this offering on the same terms and conditions as the public investors participating in this offering, price, lessand any shares of common stock purchased will make up a portion of the underwriting discount,minimum offering needed to cover over-allotments, if any.complete this offering.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwritersplacement agents expect to deliver the shares of common stock to purchasers on , 2016.no later than November 14, 2016, subject to the condition that at least 2,500,000 shares of common stock have been subscribed and paid for. The offering period cannot be extended.
Axiom Capital Management Inc. | Cuttone & Co., Inc. |
[●]
The date of this prospectus is , 2016
i
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus or any supplement or amendment hereto. We and the underwritersplacement agents have not authorized any person to provide you with different information. We and the underwritersplacement agents are not offering to sell, or seeking an offer to buy, our common stock or warrants in any jurisdiction where such offer or sale is not permitted. You should assume that the information contained in this prospectus and any supplement or amendment hereto is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock or warrants. Our business, financial condition, results of operations and prospects may have changed since that date.
Unless the context otherwise indicates, all references in this prospectus toto:
• “China” and “PRC,” refer to the People’s Republic of China;
• “Moxian,” “we,” “us,” “our” and the “Company,” refer to Moxian, Inc. and its consolidated subsidiaries and variable interest entities; • “Moxian CN Samoa” refers to Moxian CN Group Limited; • “Moxian IP Samoa” refers to Moxian Intellectual Property Limited; • “Moxian BVI” refers to Moxian Group Limited; • “Moxian HK” refers to Moxian (Hong Kong) Limited; • “Moxian Shenzhen” refers to Moxian Technologies (Shenzhen) Co., Ltd.; • “Moxian Beijing” refers to Moxian Technologies (Beijing) Co., Ltd.; • “Moxian Malaysia” refers to Moxian Malaysia SDN BHD; and • “Moyi” refers to Shenzhen Moyi Technologies Co. Ltd. |
Unless otherwise noted, all currency figures in this filing are in U.S. dollars. References to “yuan” or “RMB” are to the Chinese yuan (also known as the renminbi). References to “RM” are to the Malaysian Ringgit.
ii
This summary highlights certain information appearing elsewhere in this prospectus. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the information under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus before investing in our common stock. Unless the context requires otherwise, the words “we,” “the Company,” “us,” and “our” and refer to Moxian, Inc.,
On June 20, 2016, we effected a 1 for 2 reverse split on our subsidiaries and consolidated entities. “China”shares of common stock and the “PRC” referproportional reduction of our authorized shares from 500,000,000 shares to the People’s Republic of China. This prospectus assumes the over-allotment option of the underwriters has not been exercised, unless otherwise indicated.250,000,000 shares.
Overview
We are in the O2O (“Online-to-Offline”) business. With respect to our business, O2O means providing an online platform for small and medium sized enterprises (“SMEs”) with brick and mortar businesses that allows them to conduct business, interact with existing customers and obtain new customers online. We refer to our customers as “Merchant Clients” and we use the term “Users,” to refer to those existing and potential customers of our Merchant Clients who use our mobile application and platform. Through the features, products and services offered inon our platform, we seek to create interactioninteractions between Users and Merchant Clients, which allowswill allow Merchant Clients to study consumer behavior. Our platform has five main components and allowsthat allow Merchant Clients to conduct targeted advertising campaigns and promotions, which we believe are effective because they are geared to the customers that a Merchant Client wishes to attract. Our platform is also designed and built to encourage Users to return and refer new Users, each of which is a potential customer for our Merchant Clients.
The Platform
“Moxian+” is an App that caters to SMEs that wish to promote services and products offered at their brick and mortar stores through social media. The application connects Users to Merchant Clients through games, rewards and social events that they enjoy and in return, Users provide valuable information such as their nickname, gender, birthdate, age, career, hometown, school and residential area that our Merchant Clients can use to market their products and services effectively.
We have two different mobile applications, one for individual Users, referred to as the Moxian+ User App, and one for our Merchant Clients, referred to as the Moxian+ Business App. The apps connect to each other to form a symbiotic relationship that provides Users with entertainment and social interaction while the Merchant Clients get the chance to advertise products and services.
Merchant Clients can choose between a free or paid account. With a free account, Merchant Clients get a “Do It Yourself” webpage and can add different modules into their account, including the address and phone number of the business, as well as list up to five products. When a Merchant Client purchases one of our subscription packages they get access to a number of robust add-on features including, the ability to manage social relationships and target marketing, as well as other features. Our subscription packages range from a free account to a paid subscription of $2,000 per year.
Our individual Users, also called “MO-Pals,” can download the Moxian+ User App free-of-charge on their Android or iOS smartphone. Users provide basic information to sign up for an account and then can invite friends and family members to join Moxian+, search and join different interest groups and participate in social media such asby sharing activities, stories, photos and videos. They can also send micro-blog messages, play online games in Moxian+’s game center, and earn MO-Coins, a virtual currency similar to credit card reward points, just to name a few ofamong other the features.
There are five main components to the Moxian+ platform, which we believe provide the most robust and beneficial experience for both the Merchant Clients and the Users. These components form the Moxian+ backend.
(1) Social Media Engine -— allows users to connect with each other, discover new friends, share interests and swap media and many other things.media. It also allows merchantsMerchant Clients to reach individual users.Users.
(2) E-commerce features –— Merchant Clients are able to conduct business by posting products, offering coupons and advertising sales as well as creating events and blogs. Users can also order products at the Merchant Clients’ online shops for express delivery.
(3) Rewards -— Users can obtain MO-Points when they shop online, which allow them to play games on our platform or engage in other activities sponsored by Merchant Clients and MO-Points that can either
1
be redeemed at Merchant Clients’ online shops, or can be redeemed for MO-Coins which are virtual currency that can be used at any Merchant Client’s physical store location.
(4) Game Development –allows— allows Users to play games to earn MO-Points and MO-Coins and other rewards which may be specific to a certain Merchant Client.
(5) Data Analytics –— provides reports on consumer behaviors to each Merchant Client to help them better design their promotions and reach their target audience.
Our Strategy
We use two benchmarks to measure growth: (1) number of users and (2) number of merchants.
Our success depends upon signing up paid Merchant Clients. The Merchant Clients, in turn, help to build up our base of usersUsers by encouraging their customers to download our User App, with the incentives of MO-Points and MO-Coins provided by us. Meanwhile, inincentives that we provide. In order to attract more Merchant Clients, we also need to have an established base of Users. Therefore, we are currently making efforts to signin the process of signing up moreadditional Merchant Clients, as well as attempting to get moreacquiring additional Users to download our User App. We are initially marketing towardsto merchants in Shenzhen, China, where we launched Moxian version 1.0.
With only our beta testing completed, we signed 30,000 Merchant Clients to the Moxian version 1.0. We are currently targeting these same merchants for Moxian+ and we are working on expanding the User base. In order to expand our number of merchants we have a sales force of 20 people based in Shenzhen, China and recently opened an office in Beijing. By the end of 2016, we aim to have a 100 member sales force collectively in Shenzhen and Beijing. In addition, we are scheduling seasonal sales events to promote our products and services to merchants and users. During 2016, we also plan to utilize third party distributors withwho have an existing base of merchants to market our products and expand into major cities, such as GuanzhouGuangzhou and Shanghai.
Competitive Strengths
Major providers of social network platforms have the advantage of an existing user base,base. However, we believe that Moxian’s platform offers social media features that enable us to stand out among the competition. Other major social networking platforms usually focus on personal photo sharing, video sharing, chatting, micro-blogging, following others’ online activities, rating and commenting on products and services. Moxian’s platforms offersoffer Merchant Clients (i) individual promotion pages, (ii) local event programs for their customer Users, (iii) location-based promotion information, (iv) mobile chat applications, (v) give-away prizes for the Users, (vi) advertising opportunities on Moxian’s social pages, (vii) a social customer relationship management system, (viii) a loyalty program by the use ofusing MO-Points and MO-Coins, and (ix) customized online games to promote merchants’ brands and group sales promotions. By establishing our Merchant Client base, we believe that we will be able to acquire additional Users.
Recent Development
On September 7, 2016, we entered into note conversion agreements with Shenzhen Bayi Consulting Co. Ltd. and Moxian China Limited. The note conversion agreements provide for the conversion of promissory notes in the aggregate amount of $2 million payable by us into shares of our common stock at the public offering price. On the date of this prospectus, the notes will automatically convert into shares of common stock at a conversion price equal to the public offering price per share being offered in this offering.
2
Risk Related to Our Business
Our ability to implement our business strategy is subject to numerous risks and uncertainties that you should be aware of before making an investment decision. As a technology company, we face many risks inherent in our business and our industry generally. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading “Risk Factors,” prior to making an investment in our common stock. These risks include, among others, the following:
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• If the PRC government does not agree that our contractual arrangement with Moyi complies with PRC laws, rules and regulations we could face severe penalties;
• Moxian Shenzhen’s contractual arrangements may not be as effective in providing control over Moyi as direct ownership, and any failure by Moyi and its shareholders to perform their obligations under contractual arrangements would have material and adverse effects on our business;
• Loss of, or failure to obtain any license or permit necessary or desirable in the operation of our business could have a material adverse effect on our business and results of operations;
• If we fail to stay current with new smart phone and mobile device technologies our apps could become obsolete;
• We intend to use Moxian virtual currency to conduct substantially all of the payment processing on our platform. The virtual currency business is highly regulated, and it is subject to a range of risks. If our virtual currency is limited or restricted in any way or becomes unavailable to us for any reason, our business may be materially and adversely affected;
• We currently primarily operate in China and if the growth rate of the Chinese economy continues to slow down, the demand for products sold by our Merchant Clients may also slow down;
• The cross-border online shopping market in China is continuing to grow and may become a new competitor to the Chinese consumer goods market;
• We compete with other IT companies which can develop similar technologies and online-to-offline application to identify consumer behaviors; and
• If China adopts privacy laws they may impact our ability to provide our current data analytics features to Merchant Clients or to develop new uses for such data analytics.
Our Corporate Information
We were incorporated on October 12, 2010 in the State of Nevada. Our principal executive offices are located at Block A, 9/F, Union Plaza, 5022 Binjiang Avenue, Futian District, Shenzhen City, Guangdong Province, China. Our telephone number is +86 (0)755-66803251. We maintain a website at www.moxian.com.www.moxian.com. The information contained on our website is not, and should not be interpreted to be, a part of this prospectus.
3 |
The offering is being made on a “best efforts, minimum/maximum” basis. The offering is being made without a firm commitment by the placement agents, who have no obligation or commitment to purchase any of our shares. The closing of the offering and delivery of the shares is expected to occur no later than November 14, 2016. See “Plan of Distribution.” The placement agents must sell the minimum number of shares offered (2,500,000 shares of common stock), if any are sold, and are only required to use their best efforts to sell the shares offered.
Common stock being offered | Minimum: 2,500,000 shares | |
Shares of Common stock outstanding before this offering |
| |
Shares of Common stock outstanding after this offering | Minimum: 67,005,949 shares Maximum: 69,505,949 shares | |
Timing and Delivery of the Shares | The shares of common | |
Use of Proceeds | Our net proceeds from this offering, assuming the minimum number of shares of common stock offered (2,500,000 shares) is sold are expected to be approximately $9.0 million, and assuming the maximum number of shares of common stock offered (5,000,000 shares) is sold are expected to be approximately $18.2 million, each assuming a public offering price of $4.00. We intend to use the net proceeds from this offering for expansion of our business in China and throughout Asia, working capital and other general corporate purposes. Proceeds of this offering in the amount of $500,000 shall be used to fund an escrow account for a period of 24 months following the closing date of this offering, which account shall be used in the event we have to indemnify the placement agents pursuant to the terms of a Placement Agency Agreement with the placement agents. See “Use of Proceeds” on page 18. | |
Escrow | Unless sooner withdrawn or cancelled by either us or the placement agents, the offering will continue through November 14, 2016. Until we sell at least 2,500,000 shares of common stock, all investor funds will be held in an escrow account at Continental Stock Transfer & Trust, New York, New York, as agent, for the benefit of the investors. If we do not sell at least 2,500,000 shares of common stock by November 14, 2016, all funds will be promptly returned to investors without interest or deduction. If we complete this offering, net proceeds will be promptly delivered to us on the closing date. | |
Proposed | “MOXC” | |
Risk Factors | The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page | |
Lock-up agreements | See “Plan of |
The number of shares of our common stock to be outstanding after this offering is based on the number of shares outstanding as of December 31, 2015. September 2, 2016 and includes 500,000 shares of common stock issuable upon conversion of $2.0 million in loans to related parties, assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus. The loans will convert on the date of this prospectus at the public offering price.
Unless otherwise noted, theindicated, all information in this prospectus assumes that the underwriters do not exercise their over-allotment option.
gives effect to a 1-for-2 reverse stock split of our common stock effected on June 20, 2016.
4
SUMMARY FINANCIAL AND OTHER DATA
The following tables set forth our summary historical financial data for the periods presented. The following summary financial data for the years ended September 30, 20142015 and 20152014 are derived from our audited financial statements appearing elsewhere in this prospectus. The following summary financial data for the three-monthnine-month periods ended December 31, 2014June 30, 2016 and 2015 and the selected balance sheet data as of December 31, 2015June 30, 2016 are derived from our unaudited financial statements appearing elsewhere in this prospectus.
This summary financial data should be read together with the historical financial statements and related notes to those statements, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus.
Year Ended September 30, | Three Months Ended December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Statements of Operations Data: | ||||||||||||||||
Total Revenue | $ | 83,870 | $ | 56,122 | $ | 5,584 | $ | 45,505 | ||||||||
Loss from Operations | $ | (6,228,513 | ) | $ | (4,815,241 | ) | $ | (2,809,532 | ) | $ | (987,272 | ) | ||||
Loss before Income Tax | $ | (6,226,255 | ) | $ | (4,791,342 | ) | $ | (2,807,147 | ) | $ | (987,261 | ) | ||||
Net Loss | $ | (6,173,646 | ) | $ | (4,791,342 | ) | (2,804,228 | ) | $ | (987,261 | ) | |||||
Basic and diluted loss per common share | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.00 | ) |
The following table presents our summarypro forma as adjusted balance sheet data:data reflects the balance sheet data as of June 30, 2016, as adjusted to reflect our receipt of the estimated net proceeds from our sale of the minimum offering amount (2,500,000 shares) and maximum offering amount ( 5,000,000 shares) in this offering at an assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus, and includes 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties, assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus, after deducting the estimated placement agent commissions and estimated offering expenses payable by us.
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| As of September 30, |
| As of June 30, | ||||||||||
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| 2015 |
| 2014 |
| 2016 | ||||||||
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| Actual |
| Pro, Forma, | ||||||
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| Minimum |
| Maximum Offering | ||||
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| (Audited) |
| (Audited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) | ||||
Balance Sheet Data: |
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Current assets |
| $ | 3,479,750 |
| $ | 2,511,841 |
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| $ | 736,735 |
| 9,736,735 |
| 18,936,735 |
Other assets |
| $ | 9,594,456 |
| $ | 348,669 |
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| $ | 7,515,625 |
| 7,515,625 |
| 7,515,625 |
Total Assets |
| $ | 13,074,206 |
| $ | 2,860,510 |
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| $ | 8,252,360 |
| 17,252,360 |
| 26,452,360 |
Total Current Liabilities |
| $ | 7,569,115 |
| $ | 7,447,533 |
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| $ | 3,800,035 |
| 1,800,035 |
| 1,800,035 |
Total Liabilities |
| $ | 7,569,115 |
| $ | 7,447,533 |
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| $ | 3,800,035 |
| 1,800,035 |
| 1,800,035 |
Total Stockholders’ equity |
| $ | 5,505,091 |
| $ | (4,587,023 | ) |
| $ | 4,452,325 |
| 15,452,325 |
| 24,652,325 |
5
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| Year Ended |
| Nine Months Ended | ||||||||||||
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| 2015 |
| 2014 |
| 2016 |
| 2015 | ||||||||
Statements of Operations Data: |
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Revenues |
| $ | 83,870 |
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| $ | 56,122 |
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| $ | 18,645 |
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| $ | 86,353 |
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Cost and Expense |
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| (25,269 | ) |
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| (15,514 | ) |
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| (4,163 | ) |
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| (26,852 | ) | |
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| (843,299 | ) |
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| (78,571 | ) |
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| 1,356,306 |
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| 494,793 |
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| — |
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| — |
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| 2,034,103 |
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| 936,624 |
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| — |
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| — |
|
|
| 462,430 |
|
|
| — |
| |
|
| — |
|
|
| — |
|
|
| 1,264,700 |
|
|
| — |
| |
|
| (5,443,815 | ) |
|
| (2,176,963 | ) |
|
| 3,834,542 |
|
|
| 2,661,793 |
| |
|
| — |
|
|
| (2,600,315 | ) |
|
| — |
|
|
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss From Operations |
|
| (6,228,513 | ) |
|
| (4,815,241 | ) |
|
| (8,937,599 | ) |
|
| (4,033,709 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Tax |
|
| (6,226,255 | ) |
|
| (4,791,342 | ) |
|
| (9,418,853 | ) |
|
| (4,063,639 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (6,173,646 | ) |
| $ | (4,791,342 | ) |
| $ | (9,382,343 | ) |
| $ | (4,063,639 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
| $ | (0.11 | ) |
| $ | (0.04 | ) |
Basic and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected on June 20, 2016) pro forma – minimum |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
| $ | (0.10 | ) |
| $ | (0.04 | ) |
Basic and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected on June 20, 2016) pro forma – maximum |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
| $ | (0.10 | ) |
| $ | (0.04 | ) |
____________
As of December 31, 2015 | ||||||||
Actual | Pro, Forma, as adjusted | |||||||
(unaudited) | (unaudited) | |||||||
Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 1,249,611 | $ | |||||
Prepayments, deposits and other receivables | 752,530 | |||||||
Total Current Assets | 36,546 | |||||||
Total Assets | 11,595,646 | |||||||
Total Current Liabilities | 8,789,345 | |||||||
Total Liabilities | 8,789,345 | |||||||
Total Stockholders’ equity | 2,806,301 |
* The pro forma number of shares to be outstanding immediately after this offering as shown above is based on shares outstanding as of June 30, 2016, as adjusted basis to give effect to the sale of the minimum and maximum number of shares of common stock by us in this offering at the assumed public offering price of $4.00 per share and including the issuance of 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties and assuming a public offering price of $4.00, which is the set forth on the cover page of this prospectus. The loans will convert on the date of this prospectus at the public offering price.
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You should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could decline and you may lose all or part of your investment.
Risk relating to our Business and Industry;
Industry
If we fail to stay current with new smart phone and mobile device technologies our apps could become obsolete
obsolete.
Smartphone and mobile devices are evolving rapidly. We incur significant costs for research and development not only for the creation of new products, but also for ensuring that our current products will be compatible with new technologies. If our research and development team fails to upgrade our products to stay current with new technologies, our apps could become obsolete, which could result in a material adverse impact on our business and results of operations.
If the use of our Mo-Coins becomes restricted or unavailable, our business may be materially and adversely affected.
We are planning to use Moxian virtual currency to conduct substantially all of the payment processing on our platform. We track the User behaviors by the usage of Mo-Coins. If the use of virtual currency is limited or restricted in any way or becomes unavailable to us for any reason, the accuracy of our User behavior data may be comprised, and our business could be therefore materially and adversely affected.
The cross-border online shopping market in China is continuing to grow and may become a new competitor to the Chinese consumer goods market.
Currently, all of our Merchant Clients are located in China. As access to cross-border online shopping is made available in China, Chinese consumers may begin to purchase goods outside of China and as a result, the demand for products by Chinese merchants may decline.
We compete with other IT companies which can develop similar technologies and online-to-offline applciationsapplications to identify consumer behavior.
We are not the only company that analyzes consumer behavior and provides such data to clients. There are other companies that have similar technology or are developing superior technology that can be used in the same or more advantageous ways. We cannot assure you that the market will not become saturated with similar applications, or that our research and development efforts will give us an advantage over these other companies. We rely on our marketing efforts to sell our application and platform over our competitors, but if we are not successful in such efforts our business and results of operations could be significantly harmed.
We depend on our key executives, and our business and growth may be severely disrupted if we lose their services.
Our future success depends substantially on the continued services of our key executives. In particular, we are highly dependent upon Mr. Tan Meng Dong, James, our chairman, chief executive officer and president, who has established relationships within the industries we operate. If we lose the services of one or more of our current executive officers, we may not be able to replace them readily, if at all, with suitable or qualified candidates, and may incur additional expenses to recruit and retain new officers with industry experience similar to our current officers, which could severely disrupt our business and growth. In addition, if any of our executives joins a competitor or forms a competing company, we may lose some of our suppliers or customers. Furthermore, as we expect to continue to expand our operations and develop new products, we will need to continue attracting and retaining experienced management and key research and development personnel.
Competition for qualified candidates could cause us to offer higher compensation and other benefits in order to attract and retain them, which could have a material adverse effect on our financial condition and results of
7
operations. We may also be unable to attract or retain the personnel necessary to achieve our business objectives, and any failure in this regard could severely disrupt our business and growth.
The technology behind our products contains important trade secrets and know-how, and our ability to compete could be harmed if any such trade secrets and know-how are disclosed to third parties by our engineer.
We regard our trademarks, patents, copyrights and other intellectual property as critical to our success. In particular, we have spent a significant amount of time and resources in developing Moxian+ and our ability to protect our proprietary rights in connection with our platform and apps is critical for the success of our features and services and our overall financial performance. We expect to apply for additional patents, copyrights and trademarks as we continue the development of our platform. However, we cannot assure you that our measures will be sufficient to protect our proprietary information and intellectual property. Implementation of intellectual property laws in China has historically been lacking, primarily because of ambiguities in the laws and difficulties in enforcement.
We may be subject to intellectual property rights disputes, which could adversely affect our business, results of operations and financial condition.
We could face infringement claims from our competitors or others alleging that our methods, processes or products infringe on their proprietary technologies. If we are found to be infringing on the proprietary technology of others, we may be liable for damages, and we may be required to make changes, to redesign our products partially or completely, to pay to use the technology of others or to stop using certain technologies or producing the alleged infringing product(s) entirely. Even if we ultimately prevail in an infringement suit, the existence of the suit could prompt our Merchant Clients and Users to switch to products that are not the subject of infringement suits. We may not prevail in any intellectual property litigation and such litigation may result in significant legal costs or otherwise impede our ability to market our services.
We cannot ensureprovide assurance that we have properly registered our intellectual property, or that it has been registered in certain jurisdictions where we do business.
Some of our technologies are not covered by any patent or patent application and, even if a patent application has been filed, it may not result in an issued patent. If patents are issued to us, those patents may not provide meaningful protection against competitors or against competitive technologies. In addition, upon the expiration of patents issued to us, we will be unable to prevent our competitors from using or introducing products using the formerly-patented technology. As a result, we may be faced with increased competition and our results of operations may be adversely affected. We cannot assure you that our intellectual property rights will not be challenged, invalidated, circumvented or rendered unenforceable.
Third parties may infringe upon our intellectual property rights which themay result ofin damage to our business reputation.
Protection of our methods and technology is important to our business. We generally rely on a combination of the patent, trade secret, trademark and copyright laws of the PRC, the U.S. and Hong Kong as well as licenses and nondisclosure and confidentiality agreements, to protect our intellectual property rights. The patent, trademark, copyright and trade secret laws of some countries, though, including the PRC and Hong Kong, may not protect our intellectual property rights to the same extent as the laws of the U.S.
Failure to protect our intellectual property rights may result in the loss of valuable proprietary technologies. Even with safeguards in place, it may be possible for third parties to obtain and use our intellectual property without authorization. The unauthorized use of intellectual property is widespread in China, and enforcement of intellectual property rights by Chinese regulatory agencies is inconsistent. Moreover, litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our management’s attention and resources and could disrupt our business. If we are unable to enforce our intellectual property rights, it could have a material adverse effect on our financial condition and results of operations. Given the relative unpredictability of China’s legal system and potential difficulties enforcing a court judgment in China, we may be unable to halt the unauthorized use of our intellectual property through litigation. Failure to adequately protect our intellectual property could materially adversely affect our competitive position, our ability to attract students and our results of operations.
8
If China adopts privacy laws, they may impact our ability to provide our current data analytics features to Merchant Clients or to develop new uses for such data analytics.
We use our User data to develop an analysis software. Such data primarily comes from User conversations in our chat room and the personal information supplied when they register to use the app. This data can be analyzed and converted into useful information for us and our Merchant Clients only when we possess a large amount of accurate data. The research process may be deemed to violate the privacy of our Users. Currently, there are no PRC privacy laws governing how such data may be compiled, analyzed or used. If a law is adopted that imposes restrictions on our ability to conduct the analysis and promote data analytics to our Merchant Clients and to develop new products based on such data, our sales and results of operations could be materially adversely affected.
If the chops of our subsidiaries and VIEs in China are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of those entities could be severely and adversely compromised.
In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in China is required to have a company chop, which must be registered with the local Public Security Bureau. Our company chops, or chops, are kept securely at our President’s Office under the direction of Chief Executive Officer at the headquarters level or held securely by personnel designated and approved by the General Manager or Headmaster at subsidiaries’ or the VIEs level. Use of chops requires proper approvals in accordance with our internal control procedures. The custodian at the President’s Office also maintains a log to keep a detailed record of each use of the chops. Moreover, the President’s Office is always locked after office hours and only authorized persons have the access to the keys.
The company believes it has sufficient controls in place over access to and use of the chops. We, however, cannot assure you that unauthorized access to or use of those chops can be totally precluded. To the extent those chops are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and the operations of these entities could be significantly and adversely impacted.
Our operating subsidiaries are established outside the US, and as a result we must convert accountsChief Executive Officer has identified certain material weaknesses in the preparation of our internal controls over financial statements in conformity with U.S. GAAP for financial reporting purposes.reporting. If we are unable to remedy these material weaknesses and establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanctions, cause investors to lose confidence in our reported financial information and have a negative effect on the market price of our shares.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We maintain a system ofThe matters involving internal controls over financial reporting which is defined as a process designed by, orand disclosure controls and procedures that our management considered to be material weaknesses under the supervisionstandards of the Public Company Accounting Oversight Board were previously disclosed in our principal executive officer and principal financial officer, or persons performing similar functions, and effected byAnnual Report on Form 10-K for the year ended September 30, 2015 (the “2015 Annual Report”), which were: (1) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) ineffective controls over period end financial disclosure and reporting processes; and (4) lack of written policies and procedures for accounting and financial reporting. Subsequent to the 2015 Annual Report, management identified misstatements in the application of certain accounting practices and other personnel, to provide reasonable assurance regardingprocedures, which are discussed in detail in our Current Report on Form 8-K filed on February 8, 2016, as amended, and as a result, we restated our audited consolidated financial statements as of and for the reliabilityyear ended September 30, 2015, our unaudited condensed consolidated financial statements as of and for the nine month period ended June 30, 2015 and our unaudited condensed consolidated financial statements as of and for the six month period ended March 31, 2015. We believe that the lack of a functioning audit committee, the lack of a majority of outside directors on our board of directors, and the lack of written policies and procedures for accounting and financial reporting has resulted in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which resulted in the preparation ofrestatements described above and could result in a material misstatement in our financial statements for external purposes in accordance with U.S. GAAP.
future periods.
As a public company we have significant additional requirements for enhanced financial reporting and internal controls and are required to document and test our internal control procedures in order to satisfy the requirements of
9
Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. In addition, an independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting beginning with our annual report on Form 10-K following the date on which we become an accelerated filer or large accelerated filer. The process of designing and implementing effective internal controls over financial reporting and disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
We cannot assure you thatAs part of our continuous effort to remediate the identified material weaknesses, we will not, in the future, identify areas requiring improvement inhave initiated certain initiatives, including without limitation, appointing outside independent directors and establishing an audit committee, adding financial personnel to our internal controls overmanagement team and prepare written policies and procedures for accounting and financial reporting. Wereporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions. However, we cannot assure you that the measures we are taking and will take to remediate anythese areas in need of improvement will be successful or that once implemented, we will implement andbe able to maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatementfuture restatements of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanctions, cause investors to lose confidence in our reported financial information and have a material adverse effect on the market price of our shares.
Risks Related to Our Corporate Structure
If the Peoples Republic of China (‘PRC’) government does not agree that our contractual arrangement with Shenzhen Moyi Technologies Co Ltd. complies with PRC laws, rules and regulations we could face severe penalties.
Foreign investment in the businesses we operate, including telecommunications and Internet information services, is currently prohibited or restricted in China. As a U.S. corporation, we are restricted or prohibited from directly owning all of the equity interests in any PRC company engaged in internet- relatedinternet-related businesses. See “Regulation.” As a result, our business in China is operated by our VIE, Shenzhen Moyi Technologies Co Ltd (“Moyi”) through contractual arrangements. Moyi holds the relevant internet content provider, or ICP, licenses, which permits Moyi to engage in the business in China and is currently owned by PRC citizens and/or PRC companies. We have been and expect to continue to be dependent on Moyi to operate this business. We do not have any equity interest in Moyi, but we control their operations and receive substantially all the economic benefits and bear substantially all the economic risks through a series of contractual arrangements.
There are uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of our contractual arrangements with Moyi. Our current contractual arrangements must also comply with laws and regulations applicable to the Internet industry.
In August 2011, the Ministry of Commerce, or MOFCOM, promulgated the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rules, to implement the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or Circular No. 6, promulgated on February 3, 2011. Under these rules, a security review by MOFCOM is required for foreign investors’ mergers and acquisitions that have “national defense and security” implications and mergers and acquisitions by which foreign investors may acquire “de facto control” of domestic enterprises that have “national security” implications. The MOFCOM Security Review Rules further prohibit foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that our businesses fall within the scope of transactions subject to security review. We do not believe we are required to submit our existing contractual arrangements to MOFCOM for a security review. However, as there is a lack of clear statutory interpretation regarding the implementation of the rules, there is no assurance that MOFCOM will have the same view as we do when applying these national security review-related circulars and rules.
10
Moxian HK’s contractual arrangements may not be as effective in providing control over Moyi as direct ownership, and any failure by Moyi and its shareholders to perform their obligations under contractual arrangements would have material and adverse effects on our business.
We have no ownership interest in Moyi. We conduct substantially all of our operations and generate substantially all of our revenues through contractual arrangements that our subsidiary, Moxian HK, entered into with Moyi and its shareholders. The contractual arrangements are designed to provide us with effective control over Moyi. See “Our Corporate History and Structure” for a description of these contractual arrangements.
These contractual arrangements may not be as effective in providing control as direct ownership. For example, if Moyi or their respective shareholders fail to perform their respective obligations under these contractual arrangements, or if they take other actions that are detrimental to our interests, we may incur substantial costs and have to re-direct resources in connection with enforcing these arrangements. To enforce these arrangements, we may rely on legal remedies available under applicable PRC laws, including seeking specific performance or injunctive relief and claiming damages, but these remedies may not be effective. In particular, if shareholders of Moyi refuse to transfer their equity interests to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may need to initiate legal action to compel them to fulfill their contractual obligations. In addition, we may not be able to renew these contracts with our VIE and/or its respective shareholders. If VIEsVIE or their shareholders fail to perform the obligations secured by the pledges under the equity pledge agreements, one of the remedies for default is to require the pledgers to sell the equity interests of VIEsVIE in an auction or sale of the shares and remit the proceeds to us, net of all related taxes and expenses. Such an auction or sale of the shares may not result in our receipt of the full value of the equity interests or the business of VIEs
VIE.
In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Any arbitration, legal proceedings or disputes may cost us substantial financial and other resources and result in disruption of our business, and the outcome might not be in our favor. The relevant PRC arbitration panel may conclude that our contractual arrangements violate PRC law or are otherwise unenforceable and we could consequently lose our ability to consolidate Moyi’s results of operations, assets and liabilities in our consolidated financial statements and/or to transfer the revenues of Moyi to Moxian HK. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these contractual arrangements. Under PRC law, prevailing parties in an arbitration proceeding may only enforce the arbitration award in Chinese courts through arbitration award recognition proceedings, which would cause us to incur additional expenses and delay. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over Moyi, and our ability to conduct our business may be materially and adversely affected.
Loss of or failure to obtain any license or permit necessary or desirable in the operation of our business could have a material adverse effect on our business and results of operations.
Moyi is required to obtain various operating licenses and permits and to make registrations and filings for our current business in China; failure to comply with these requirements may materially adversely affect our business operations. Moyi currently holds an Internet Content Provider, or ICP license, to provide information to online Internet users. In order to engage in and publish online games, Moxian was issued an Online Culture Operating Permit and an Internet Publications Distribution License. Web portals like Moxian are required to apply to and register with the General Administration for Press and Publication (“GAPP”), before distributing Internet publications. Internet publications include content or articles formally published by press media such as: (i) books, newspapers, periodicals, audio-visual products and electronic publications; and (ii) literature, art and articles on natural science, social science, engineering and other topics that have been edited. Moxian has applied for, but has not yet obtained, the license from GAPP that would enable it to distribute Internet publications.
If we are determined not to be in compliance with the applicable licensing requirements or if we fail to cure any non-compliance in a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliant operations or the suspension of our noncompliant operations, which may materially and adversely affect our business and results of operations.
11
We are a holding company organized in Nevada, with subsidiaries incorporated in Samoa, the British Virgin Islands, Hong Kong Malaysia & PRC corporations and all of our officers and directors reside outside the US. Therefore, investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in any of these jurisdictions based upon U.S. laws, including the federal securities laws or other foreign laws against us, our officers and directors.
All of our subsidiaries and our current operations are conducted outside of the United States. Moreover, all of our directors and officers are nationals and residents of China and Singapore. All or substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible to effect service of process within the United States or elsewhere upon these persons. In addition, uncertainty exists as to whether the courts outside of the U.S. would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in jurisdictions outside of the U.S. against us or such persons predicated upon the securities laws of the United States or any state thereof.
Risks Related to Doing Business in China
If the growth rate of the Chinese economy continues to slow down, the demand for products sold by our Merchant Clients may also slow down.
Moody’s Investors Service, which provides credit ratings and research covering debt instruments and securities, downgraded its outlook on the Chinese government debt from “stable” to “negative” which reflects an assumption that the Chinese economy is weakening and continues to slow down. A slowdown in the economy may lead to less demand by consumers for products offered by our Merchant Clients. If our Merchant Clients are impacted by the low demand, they may attempt to curtail expenses by cancelling subscriptions for our services, which could have a material adverse effect on our revenues, and negatively impact our results of operations.
Contract drafting, interpretation and enforcement in China involves significant uncertainty.
We have entered into numerous contracts governed by PRC law in the ordinary course of our business, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail. As almost all of our contracts in the ordinary course of business are governed by PRC law, any dispute involving such contracts, even those without merit, may materially and adversely affect our reputation and our business operations, and may cause the price of our shares to decline.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively, whether for securing debt or to expand our business through acquisitions and development and for dividend payments to our shareholders, which may affect the value of your investment.
The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our Nevada holding company primarily relies on dividend payments from our wholly owned PRC subsidiary in China, Moxian Shenzhen, to fund any cash and financing requirements we may have.
Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements. Therefore, Moxian Shenzhen may pay dividends in foreign currency to us without pre-approval from SAFE. However, approval from or registration with government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. With the prior approval from SAFE, cash generated from the operations of our PRC subsidiary may be used to pay off debt owed to entities outside China in a currency other than RMB. The PRC government may, at its discretion,
12
restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the common stock.
Government censorship and control may limit our ability to utilize our platform in China, which may cause becomes restricted or unavailable, our business may be materially and adversely affected.
our platform is limited or restricted in any way or becomes unavailable to us for any reason, Merchant Clients and Users may not be willing to use our platform, and our business could be therefore materially and adversely affected.
Payment of dividends is subject to restrictions under Nevada and the PRC laws.
Under Nevada law, we may only pay dividends subject to our ability to service our debts as they become due and provided that our assets will exceed our liabilities after the dividend. Our ability to pay dividends will therefore depend on our ability to generate sufficient profits. In addition, because of the various rules applicable to our operations in China and the regulations on foreign investments as well as the applicable tax law, we may be subject to further limitations on our ability to declare and pay dividends to our shareholders.
We can give no assurance that we will declare dividends of any amounts, at any rate or at all in the future. The declaration of future dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements, general financial conditions, legal and contractual restrictions and other factors that our board of directors may deem relevant.
As we derive substantially all of our revenue from the PRC, any downturn in Chinese macroeconomic trends may harm our business.
All of our business operations are conducted in China and all of our revenues are generated in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, the level of development, the growth rate, the control of foreign exchange, and the allocation of resources.
While the Chinese economy had grown significantly in the past 30 years, the growth has been uneven geographically among various sectors of the economy, and over the last year we have been experiencing a period of slowdown. We cannot assure you that China’s economy will continue to grow, or that if there is growth, such growth will be steady and uniform, or that if there is a slowdown, such slowdown will not have a negative effect on our business. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Between late 2003 and 2008, the PRC government implemented a number of measures, such as increasing the PBOC’s statutory deposit reserve ratio and imposing commercial bank lending guidelines, which slowed the growth of credit. In 2008 and 2009, however, in response to the global financial crisis, the PRC government loosened such requirements. Any actions and policies adopted by the PRC government or any prolonged slowdown in China’s economy could have a negative impact on our business, operating results and financial condition in a number of ways.
The enforcement of labor contract law and increase in labor costs in the PRC may adversely affect our business and our profitability.
China adopted a labor contract law and its implementation rules effective on January 1, 2008 and September 18, 2008, respectively. The labor contract law and its implementation rules impose more stringent requirements on employers with regard to, among others, minimum wages, severance payments upon permitted terminations of the employment by an employer and non-fixed term employment contracts, time limits for probation period as well as the duration and the times that an employee can be placed on a fixed term employment contract. Due to the limited period of effectiveness of the labor contract law and its implementation rules, and the lack of clarity with respect to their implementation, potential penalties and fines, it is uncertain how they will impact our current employment policies and practices. Our employment policies and practices may violate the labor contract law or its implementation rules and we may be subject to related penalties, fines or legal fees. Compliance with the
13
labor contract law and its implementation rules may increase our operating expenses, in particular our personnel expenses, as the continued success of our business depends significantly on our ability to attract and retain qualified personnel. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the labor contract law and its implementation rules may also limit our ability to effect those changes in a manner that we believe to be cost-effective or desirable, which could adversely affect our business and results of operations.
Additionally, PRC companies are subject to various laws and regulations regarding social insurance and housing funds, under which our PRC subsidiary and affiliates are required to pay employees’ pension contributions, housing funds, medical insurance premiums and other welfare-oriented payments.
We must comply with the Foreign Corrupt Practices Act.
We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. In the foreseeable future, some of our suppliers may be owned by the PRC government and our dealings with them are likely to be considered to be with government officials for these purposes. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. We could suffer severe penalties if our employees or other agents were found to have engaged in such practices.
Risks Related to this Offering
Prior to this offering, we had a limited public market for our shares of common stock and you may not be able to resell our shares at or above the price you paid, or at all.
Prior to this offering, there was a limited public market for our common stock in the OTC Market. We cannot assure you that an active public market for our common stock will develop or that the market price of our shares will not decline below the public offering price. The public offering price of our shares will be determined in large part by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the trading market following the offering. We cannot assure you that an active trading market for our shares will develop or that the market price of our shares will not decline below the public offering price.
Our Chairman of the Board and our Chief Executive Officer, Mr. Mengdong Tan, own a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.
Mr. James Mengdong Tan, our Chairman and CEO, through Good Eastern Investment and Stellar Elite Limited, beneficially owns 55%46.58% of our outstanding shares of common stock, and after this offering will beneficially own [●[•]% of our outstanding common stock.stock assuming the minimum offering amount is raised and [•]% of our outstanding common stock assuming the maximum offering amount is raised. As a result, Mr. Tan will be able to exercise significant influence over all matters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets. This concentration of ownership in our shares by an executive officer will limit the other shareholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Future sales of substantial amounts of the shares of common stock by existing shareholders could adversely affect the price of our common stock.
If our existing shareholders sell substantial amounts of the shares following this offering, the market price of our common stock could fall. Such sales by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time and place we deem appropriate. The [●[•] shares of common stock offered in this offering will be eligible for immediate resale in the public market without restrictions. All remaining shares, which are currently held by our existing shareholders, may be sold in the public market in the future subject to the lock-up agreements and the restrictions contained in Rule 144 under the Securities Act. If any existing shareholders sell a substantial amount of shares, the prevailing market price for our shares could be adversely affected.
14
The market price of our shares is likely to be highly volatile and subject to wide fluctuations in response to factors such as:
• variations in our actual and perceived operating results;
• news regarding gains or losses of customers or partners by us or our competitors; • news regarding gains or losses of key personnel by us or our competitors; • announcements of competitive developments, acquisitions or strategic alliances in our industry by us or our competitors; • changes in earnings estimates or buy/sell recommendations by financial analysts; • potential litigation; • the imposition of fines or penalties related to our activities in the PRC and failure to comply with applicable rules and regulations; • general market conditions or other developments affecting us or our industry; and •the operating and stock price performance of other companies, other industries and other events or factors beyond our control. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the shares
We do not anticipate paying cash dividends on our common stock in the foreseeable future.
We do not anticipate paying cash dividends in the foreseeable future. Presently, we intend to retain all of our earnings, if any, to finance development and expansion of our business. PRC capital and currency regulations may also limit our ability to pay dividends. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates.
We will have discretion in applying a portion of the net proceeds of this offering and may not use these proceeds in ways that will enhance the market value of our common stock.
Our management will have considerable discretion in the application of the proceeds received by us from this offering. Such proceeds may be used to expand our research and development team, acquire new technological hardware, and expand our sales and marketing team all over China and for working capital and general corporate purposes. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our profitability or increase our common stock price. The net proceeds from this offering may also be placed in investments that do not produce income or that lose value.
Future issuances of capital stock may depress the trading price of our common stock.
Any issuance of shares of our common stock after this offering could dilute the interests of our existing stockholders and could substantially decrease the trading price of our common stock. We may issue additional shares of common stock in the future for a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions, strategic collaborations or other transactions).
Sales of a substantial number of shares of our common stock in the public market could depress the market price of our common stock, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock
15
TableInvestors risk loss of Contentsuse of funds subscribed, with no right of return, during the offering period.
We cannot assure you that all or any shares of common stock will be sold. The placement agents are offering our shares on a “best efforts minimum/maximum basis.” We have no firm commitment from anyone to purchase all or any of the shares offered. If subscriptions for a minimum of 2,500,000 shares are not received on or before November 14, 2016, escrow provisions require that all funds received be promptly refunded. If refunded, investors will receive no interest on their funds. During the offering period, investors will not have any use or right to return of the funds.
16
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock price. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. We operate in a very competitive and rapidly changing environment. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Accordingly, you should not place undue reliance on our forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as required by law.
17
We estimate that the net proceeds from the sale of the [●] shares of common stock in the offering will be approximately $[●] million afterAfter deducting the underwriting discounts andestimated placement agent commissions and estimated offering expenses. Ourexpenses payable by us, we expect to receive net proceeds will be approximately $[●] millionof $9,000,000 from this offering, if the underwriters exercise their optionminimum offering amount is sold, or $18,200,000, if the maximum offering amount is sold. Proceeds of this offering in fullthe amount of $500,000 shall be used to purchase [●] additional sharesfund an escrow account for a period of common stock from us.24 months following the closing date of this offering, which account shall be used in the event we shall have to indemnify the placement agents pursuant to the terms of the Placement Agency Agreement. We anticipate that the proceeds of a minimum and a maximum offering would be applied approximately as follows:
MINIMUM OFFERING (2,500,000 Shares)
We intend to use the net proceeds from the offering for expansion of our business in China and throughout Asia, working capital and other general corporate purposes.
USE OF PROCEEDS |
| AMOUNT |
Expand our business in China and throughout Asia including setting up regional and sales offices in first and second tier cities in China, as well as infrastructure investment for the build-out and expansion of offices in these cities | $6.0 million | |
General corporate purposes and funding potential acquisitions of complementary businesses, assets and technologies | $3.0 million |
MAXIMUM OFFERING (5,000,000 Shares)
USE OF PROCEEDS | AMOUNT | |
Expand our business in China and throughout Asia including setting up regional and sales offices in first and second tier cities in China, as well as infrastructure investment for the build-out and expansion of offices in these cities | $13.1 million | |
General corporate purposes and funding potential acquisitions of complementary businesses, assets and technologies | $5.1 million |
The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments, and the rate of growth, if any, of our business.
Although we may use a portion of the proceeds for the acquisition of, or investment in, companies, technologies, products or assets that complement our business, we have no present understandings, commitments or agreements to enter into any acquisitions or make any investments. We cannot assure you that we will make any acquisitions or investments in the future.
18
The following table sets forth our capitalization as of December 31, 2015:June 30, 2016:
• On an actual basis; and
• On a pro forma, as adjusted basis to give effect to the sale of the minimum and maximum number of shares of common stock by us in this offering at the assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus, and after deducting the estimated placement agent commissions and estimated offering expenses payable by us. |
You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
|
| Minimum Offering (2,500,000 shares of common stock) June 30, 2016 | ||||||
|
| Actual |
| Pro forma | ||||
|
|
| (unaudited) |
|
| (unaudited) | ||
Assets: |
|
|
|
|
|
|
|
|
| $ | 736,735 |
|
| $ | 9,736,735 |
| |
|
| 7,515,625 |
|
|
| 7,515,625 |
| |
Total Assets |
| $ | 8,252,360 |
|
| $ | 17,252,360 |
|
Liabilities: |
|
|
|
|
|
|
|
|
| $ | 3,800,035 |
|
| $ | 1,800,035 |
| |
|
| — |
|
|
| — |
| |
| 3,800,035 |
|
| 1,800,035 |
| |||
Shareholder’s Equity: |
|
|
|
|
|
|
|
|
| 64,006 |
|
| 67,006 |
| |||
|
| 24,691,259 |
|
|
| 35,688,259 |
| |
|
| (20,557,155 | ) |
|
| (20,557,155 | ) | |
|
| 254,215 |
|
|
| 254,215 |
| |
|
| 4,452,325 |
|
|
| 15,452,325 |
| |
Total Liabilities and Shareholders’ Equity |
| $ | 8,252,360 |
|
| $ | 17,252,360 |
|
December 31, 2015 | ||||||||
(unaudited) | ||||||||
Actual | Pro Forma | |||||||
Cash and cash equivalents | $ | 1,249,611 | ||||||
Loans from shareholders | 2,205,299 | |||||||
Subscription Payment | 6,161,714 | |||||||
Total Current Liabilities | 8,789,345 | |||||||
Stockholders’ Equity: | ||||||||
Preferred stock, $.001 par value, 100,000,000 shares authorized; no share issued and outstanding. | - | |||||||
Common stock, $.001 par value, 500,000,000 shares authorized; 214,666,944 shares issued and outstanding; [●] shares issued and outstanding, as adjusted | 214,667 | |||||||
Additional paid-in capital | 16,350,577 | |||||||
Deficit accumulated during the development stage | (13,979,040 | ) | ||||||
Accumulated other comprehensive income | 220,097 | |||||||
Total stockholders’ equity | 2,806,301 | |||||||
Total Capitalization | 11,595,646 |
____________
* Retroactively restated for effect of 1 for 2 reserve stock split on June 20, 2016
(1) The pro forma number of shares to be outstanding immediately after this offering as shown above is based on shares outstanding as of December 31, 2015.June 30, 2016, assuming the minimum offering amount (2,500,000 shares) has been sold and includes 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties, assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus. The loans will convert on the date of this prospectus at the public offering price.
19
|
| Maximum Offering | ||||||
|
| Actual |
| Pro forma | ||||
|
| (unaudited) |
| (unaudited) | ||||
Assets: |
|
|
|
|
|
|
|
|
| $ | 736,735 |
|
| $ | 18,936,735 |
| |
|
| 7,515,625 |
|
|
| 7,515,625 |
| |
Total Assets |
| $ | 8,252,360 |
|
| $ | 26,452,360 |
|
Liabilities: |
|
|
|
|
|
|
|
|
| $ | 3,800,035 |
|
| $ | 1,800,035 |
| |
|
| — |
|
|
| — |
| |
| 3,800,035 |
|
| 1,800,035 |
| |||
Shareholder’s Equity: |
|
|
|
|
|
|
|
|
| 64,006 |
|
| 69,506 |
| |||
|
| 24,691,259 |
|
|
| 44,885,759 |
| |
|
| (20,557,155 | ) |
|
| (20,557,155 | ) | |
|
| 254,215 |
|
|
| 254,215 |
| |
|
| 4,452,325 |
|
|
| 24,652,325 |
| |
Total Liabilities and Shareholders’ Equity |
| $ | 8,252,360 |
|
| $ | 26,452,360 |
|
____________
Table* Retroactively restated for effect of Contents1 for 2 reserve stock split on June 20, 2016
(2) The pro forma number of shares to be outstanding immediately after this offering as shown above is based on shares outstanding as of June 30, 2016, assumes the maximum offering amount (5,000,000 shares) has been sold and includes 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties, assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus. The loans will convert on the date of this prospectus at the public offering price.
20
If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share you will pay in this offering and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our pro forma net tangible book value as of June 30, 2016 was $[●] ,$(1,251,395) million, or $[●]$(0.02) per share of common stock. Our pro forma net tangible book value per share set forth below represents our total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding on .outstanding.
After giving effect to our issuance and sale of [●]shares of common stock in thisIf the minimum offering amount is sold at an assumed public offering price of $[●]$4.00 per share, ,which is set forth on the cover page of this prospectus, after deducting the estimated underwriting discountsplacement agent commissions and offering expenses payable by us, the pro forma as adjusted net tangible book value as of [●]June 30, 2016 would have been $ [●],$9.7 million, or $ [●]$0.15 per share. This represents an immediate increase in net tangible book value to existing shareholders of $[●]$0.17 per share. The public offering price per share will significantly exceed the net tangible book value per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $[●]$3.85 per share. The following table illustrates this per share dilution to the new investors purchasing shares of common stock in thisassuming the minimum offering without giving effect to the over-allotment option granted to the underwriters:amount is sold:
Assumed public offering price per share |
| $ | 4.0 |
Net tangible book value per share as of June 30, 2016 |
|
| (0.02) |
Increase in net tangible book value per share attributable to the offering |
|
| 0.17 |
Pro forma net tangible book value per share as of after giving effect to the offering |
|
| 0.15 |
Dilution per share to new investors |
| $ | 3.85 |
A $1.00 increase (decrease) in the assumed public offering price of $[●]$4.00 per share, which is set forth on the cover page of this prospectus, would increase (decrease) the pro forma net tangible book value by $[●]$2.3 million, the pro forma net tangible book value per share after this offering by $[●]$0.20 per share and the dilution in pro forma net tangible book value per share to investors in this offering by $[●]$0.97 per share, assuming that the minimum number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discountplacement agent commissions and offering expenses payable by us.
If the underwriters exercise their over-allotment option in full,maximum offering amount is sold at an assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus, after deducting the estimated placement agent commissions and offering expenses payable by us, the pro forma as adjusted net tangible book value will increase to $[●]as of June 30, 2016 would have been $18.9 million, or $0.27 per share, representingshare. This represents an immediate increase in net tangible book value to existing shareholders of $[●]$0.29 per share. The public offering price per share and an immediate dilution of $[●]will significantly exceed the net tangible book value per share toshare. Accordingly, new investors. If any shares are issued in connection with outstanding options, you will experience further dilution.
The table above assume no exercise of warrants toinvestors who purchase shares of common stock outstanding asin this offering will suffer an immediate dilution of [●], 2016. At[●] ,2016, there were [●] sharestheir investment of common stock issuable upon exercise of outstanding warrants at a weighted average exercise$3.73 per share.
The following table illustrates this per share dilution to the new investors assuming the maximum offering amount is sold:
Assumed public offering price per share |
| $ | 4.0 |
Net tangible book value per share as of June 30, 2016 |
|
| (0.02) |
Increase in net tangible book value per share attributable to the offering |
|
| 0.29 |
Pro forma net tangible book value per share as of after giving effect to the offering |
|
| 0.27 |
Dilution per share to new investors |
| $ | 3.73 |
A $1.00 increase in the assumed public offering price of $$4.00 per share.
Ifshare, which is set forth on the underwriters exercise their over-allotment optioncover page of this prospectus, would increase the pro forma net tangible book value by $4.6 million, the pro forma net tangible book value per share after this offering by $0.36 per share and the dilution in full,pro forma net tangible book value per share to investors in this offering by $0.93 per share, assuming that the maximum number of shares heldoffered by new investors will increase to [●] , or [●]%us, as set forth on the cover page of this prospectus, remains the total number of shares of common stock outstandingsame and after this offering.
deducting the estimated placement agent commissions and offering expenses payable by us.
21
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our common stock is currently quoted on the OTCQB under the trading symbol “MOXC.” Our common stock did not trade prior to April 10, 2014.
Trading in stocks quoted on the OTCQB is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.
For the periods indicated, the following table sets forth the high and low bid prices per share of common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. These high and low bid prices per share of common stock have been adjusted to give effect to the 1-for-2 reverse stock split of our common stock effected on June 20, 2016.
Fiscal Year 2016 |
| High Bid |
| Low Bid | ||
First Quarter |
| $ | 10.90 |
| $ | 7.98 |
Second Quarter |
| $ | 10.40 |
| $ | 8.00 |
Third Quarter |
| $ | 8.20 |
| $ | 7.20 |
Fourth Quarter (through September 2, 2016) |
| $ | 8.20 |
| $ | 5.65 |
Fiscal Year 2016 | High Bid | Low Bid | ||||||||||||
First Quarter (through February 29, 2016) | $ | 5.45 | $ | 3.99 | ||||||||||
Fiscal Year 2015 | High Bid | Low Bid |
| High Bid |
| Low Bid | ||||||||
First Quarter | $ | 5.85 | $ | 5.25 |
| $ | 11.70 |
| $ | 10.50 | ||||
Second Quarter | $ | 5.90 | $ | 5.10 |
| $ | 11.80 |
| $ | 10.20 | ||||
Third Quarter | $ | 6.30 | $ | 5.70 |
| $ | 12.60 |
| $ | 11.40 | ||||
Fourth Quarter | $ | 6.50 | $ | 5.70 |
| $ | 13.00 |
| $ | 11.40 | ||||
Fiscal Year 2014* | High Bid | Low Bid | ||||||||||||
First Quarter | $ | -- | $ | -- | ||||||||||
Second Quarter | $ | -- | $ | -- | ||||||||||
Third Quarter (commencing on April 10, 2014) | $ | 5.20 | $ | 3.00 | ||||||||||
Fourth Quarter | $ | 11.00 | $ | 4.30 |
Fiscal Year 2014* |
| High Bid |
| Low Bid | ||
First Quarter |
| $ | — |
| $ | — |
Second Quarter |
| $ | — |
| $ | — |
Third Quarter (commencing on April 10, 2014) |
| $ | 10.40 |
| $ | 6.00 |
Fourth Quarter |
| $ | 22.00 |
| $ | 8.60 |
____________
* The Company’s Common Stockcommon stock did not trade until April 10, 2014.
Holders
As of March 15,September 2, 2016, we had 128,011,88364,005,949 shares of our Common Stock par value, $0.001common stock issued and outstanding. There were approximately 265283 registered owners of our Common Stock.
common stock.
Dividend Policy
Any future determination as to the declaration and payment of dividends on shares of our Common Stockcommon stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of Common Stock.common stock. In addition, we currently have no plans to pay such dividends. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future.
22
Our business is conducted in China and all of our revenues are denominated in RMB. Capital accounts of our consolidated financial statements are translated into U.S. dollars from RMB at their historical exchange rates when the capital transactions occurred. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB, HKD and MYR amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.
Assets and liabilities are translated at the exchange rates as of the balance sheet date.
Balance sheet items, except for equity accounts |
| June 30, |
| September 30, |
RMB:USD |
| 6.6443 |
| 6.3568 |
HKD:USD |
| 7.7589 |
| 7.7501 |
MYR:USD |
| 4.0046 |
| 4.4124 |
Balance sheet items, except for equity accounts | December 31, 2015 | September 30, 2015 | |||||||
RMB:USD | 6.4917 | 6.3568 | |||||||
HKD:USD | 7.7510 | 7.7501 | |||||||
MYR:USD | 4.3026 | 4.4124 |
RevenuesItems in the statements of operations and expensescomprehensive loss, and statements cash flows are translated at the average exchange rate of the period.
|
| Nine Months Ended | ||
|
| 2016 |
| 2015 |
RMB:USD |
| 6.4875 |
| 6.1444 |
HKD:USD |
| 7.7618 |
| 7.7556 |
MYR:USD |
| 4.1613 |
| 3.6177 |
Three Months Ended December 31, | |||||||||
2015 | 2014 | ||||||||
RMB:USD | 6.3907 | 6.1389 | |||||||
HKD:USD | 7.7506 | 7.7559 | |||||||
MYR:USD | 4.2821 | 3.3643 |
23
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table presents our selected historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statement and notes thereto included elsewhere in this prospectus.
The statements of operationsfollowing selected consolidated financial and operating data for the fiscal years ended September 30, 2015 and 2014, and the statements of financial conditionconsolidated balance sheet data as of September 30, 2015 and 2014, arehave been derived from our auditedconsolidated financial statements included elsewhere in this prospectus.
The statementselected consolidated statements of operations data for the three-month periodsnine months ended December 31, 2014June 30, 2016 and 2015, and the selectedsummary consolidated balance sheet data as of December 31, 2015 areJune 30, 2016, have been derived from our unaudited consolidated financial statements appearingincluded elsewhere in this prospectus. We have prepared the unaudited consolidated financial statements on the same basis as our audited consolidated financial statements. The unaudited consolidated financial statements include all adjustments, consisting only of normal and recurring adjustments that we consider necessary to fairly present our financial position and results of operations for the periods presented.
|
| As of September 30, |
| As of June 30, | ||||||
|
| 2015 |
| 2014 |
| 2016 | ||||
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 2,398,713 |
| $ | 1,770,196 |
|
| $ | 96,587 |
Prepayments, Deposits and Other Receivable |
| $ | 1,042,727 |
| $ | 741,645 |
|
| $ | 607,645 |
Total Assets |
| $ | 13,074,206 |
| $ | 2,860,510 |
|
| $ | 8,252,360 |
Total Current Liabilities |
| $ | 7,569,115 |
| $ | 7,447,533 |
|
| $ | 3,800,035 |
Total Liabilities |
| $ | 7,569,115 |
| $ | 7,447,533 |
|
| $ | 3,800,035 |
Total Stockholders’ equity |
| $ | 5,505,091 |
| $ | (4,587,023 | ) |
| $ | 4,452,325 |
Year Ended September 30, | Three Months Ended December, |
| Year Ended |
| Nine Months Ended | |||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 |
| 2015 |
| 2014 |
| 2016 |
| 2015 | |||||||||||||||||||||
Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Revenues | $ | 83,870 | $ | 56,122 | 5,584 | 45,505 |
| $ | 83,870 |
|
| $ | 56,122 |
|
| $ | 18,645 |
|
| $ | 86,353 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Cost and Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Cost of Sales | (25,269 | ) | (15,514 | ) | (1,306 | ) | (7,911 | ) |
|
| (25,269 | ) |
|
| (15,514 | ) |
|
| (4,163 | ) |
|
| (26,852 | ) | ||||||||
Depreciation and Amortization Expenses | (843,299 | ) | (78,571 | ) | (443,444 | ) | (35,081 | ) |
|
| (843,299 | ) |
|
| (78,571 | ) |
|
| 1,356,306 |
|
|
| 494,793 |
| ||||||||
|
| — |
|
|
| — |
|
|
| 2,034,103 |
|
|
| 936,624 |
| |||||||||||||||||
|
| — |
|
|
| — |
|
|
| 462,430 |
|
|
| — |
| |||||||||||||||||
|
| — |
|
|
| — |
|
|
| 1,264,700 |
|
|
| — |
| |||||||||||||||||
Selling, General and Administrative Expenses | (5,443,815 | ) | (2,176,963 | ) | (2,370,366 | ) | (989,785 | ) |
|
| (5,443,815 | ) |
|
| (2,176,963 | ) |
|
| 3,834,542 |
|
|
| 2,661,793 |
| ||||||||
Impairment of Goodwill | - | (2,600,315 | ) | - | - |
|
| — |
|
|
| (2,600,315 | ) |
|
| — |
|
|
| — |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Loss From Operations | (6,228,513 | ) | (4,815,241 | ) | (2,809,532 | ) | (987,272 | ) |
|
| (6,228,513 | ) |
|
| (4,815,241 | ) |
|
| (8,937,599 | ) |
|
| (4,033,709 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Loss before Income Tax | (6,226,255 | ) | (4,791,342 | ) | 1,501 | - |
|
| (6,226,255 | ) |
|
| (4,791,342 | ) |
|
| (9,418,853 | ) |
|
| (4,063,639 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Loss | $ | (6,173,646 | ) | $ | (4,791,342 | ) | $ | (2,804,228 | ) | $ | (987,261 | ) |
| $ | (6,173,646 | ) |
| $ | (4,791,342 | ) |
| $ | (9,382,343 | ) |
| $ | (4,063,639 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Basic and diluted loss per common share | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||||||||||||||||||
Basic and diluted loss per common share(retroactively restated for effect of 1 for 2 reserve stock split on June 20, 2016) |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
| $ | (0.11 | ) |
| $ | (0.04 | ) | ||||||||||||||||
Basic and diluted loss per common share (retroactively restated for effect of 1 for 2 reserve stock split on June 20, 2016), pro forma* |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
| $ | (0.11 | ) |
| $ | (0.04 | ) |
As of September 30, | As of December 31, | |||||||||||
2015 | 2014 | 2015 | ||||||||||
Balance Sheet Data: | ||||||||||||
Cash and cash equivalents | $ | 2,398,713 | $ | 1,770,196 | $ | 1,249,611 | ||||||
Prepayments, Deposits and Other Receivable | 1,042,727 | 741,645 | 752,530 | |||||||||
Total Assets | 13,074,206 | 2,860,510 | 11,595,646 | |||||||||
Total Current Liabilities | 7,569,115 | 7,447,533 | 8,789,345 | |||||||||
Total Liabilities | 7,569,115 | 7,447,533 | 8,789,345 | |||||||||
Total Stockholders’ equity | 5,505,915 | (4,587,023 | ) | 2,806,301 |
____________
shares to be outstanding immediately after this offering as shown above is based on shares outstanding as of June 30, 2016, assuming the issuance of 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties and assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus. The loans will convert on the date of this prospectus at the public offering price.
24
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and the related notes thereto and other financial information appearing elsewhere in this Form S-1. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in this prospectus.
Overview
We are in the O2O (”(“Online-to-Offline”) business. While there are many definitions of O2O, with respect to our business, O2O means providing an online platform for small and medium sized enterprises (“SMEs”) with physical stores to conduct business online, interact with existing customers and obtain new customers. We refer to our customers as “Merchant Clients” and the users of our platform that are their existing and potential customers as “Users.” Through our platform and the products and services offered through it, we seek to create interaction between our Users and Merchant Clients by allowing Merchant Clients to study consumer behavior. Our products and services are designed to allow Merchant ClientClients to conduct targeted advertising campaigns and promotions which we believe are more effective because they are geared for the customers that a Merchant Client wishes to reach. Our platform is also designed and built to encourage Users to return and obtain new Users, each of which is a potential customer for our Merchant Clients.
Where weWe believe we are different from other companies in that our plan is to sign up merchants first and build our user base utilizing their customers. Many companies utilize a different strategy of building up a user base and then signing up paying merchants and other clients to access that user base.
The current version of our platform is called “Moxian+” which consists of our user mobile application (“App”) called the Moxian+ User App and a separate App for our Merchant Clients called the Moxian+ Business App. Both versions of the App are currently available in the Google Play Store and the Apple App Store. There is no charge to download either App. We also have a website that can be accessed atwww.moxian.com where either App can also be downloaded.
Moxian principally operates in mainland China with its headquarters in Shenzhen, China. We launched Moxian version 1.0 which only consists of the User component App in Malaysia in June 2013 and subsequently in China in July 2014. InDuring 2014 to 2015, we developed the Apps as part of “Moxian+,” the successor to Moxian version 1.0 which was then officially launched in October 2015 in China only. In December 2015, we opened our Beijing officeoffice. We are currently operating in both Shenzhen and it is currently in full operation.
Beijing.
We are currently in the process of expanding our operations to Shanghai and Guangzhou.
As of December 31, 2015June 30, 2016 and September 30, 2015, our accumulated deficits were $(13,979,040)$20,557,155 and $(11,174,812),$11,174,812, respectively. Our stockholders’ equity was $2,806,301$4,452,325 and $5,505,091, respectively. We have so far generated $5,584$5,703 and $18,645 in revenue in the three months and nine months ended December 31, 2015.June 30, 2016, respectively. Our losses have principally been attributed to operating expenses,selling, general administrative, advertising agency fee, impairment charge on intangible assets and other operatingresearch and development expenses.
Recent Developments
As of December 16, 2015, we entered into a Second Amendment Agreement to the Subscription Agreement (the “Second Amendment Agreement”) with Xinhua Huifeng Investment Center Co., Ltd. (Beijing) (“Xinhua”) to amend the Subscription Agreement entered by the Company and Xinhua (“Xinhua Subscription Agreement”) dated as of June 4, 2015, which was subsequently amended on August 13, 2015. Under the Xinhua Subscription Agreement, the Company agreed to sell an aggregate of 8,169,0004,095,000 shares of the Company’s Common Stock at a per share price of $1.00$2.00 for gross proceeds of $8,190,000 (approximately RMB50,000,000) (the “Purchase Price”) and to issue to Xinhua for no additional consideration a warrant (the “Warrant”) to purchase in the aggregate of 32,000,000
25
16,000,000 shares of Common Stock at an exercise price of $2.00$4.00 per share, exercisable on or prior to July 31, 2015 (the “Expiration Date”)(such transaction, the “Transaction”).
Under the Second Amendment Agreement, the Closing Date of the Transaction was extended to December 31, 2015 and the Expiration Date of the Warrant was extended to December 31, 2015. As of the date of this prospectus, we received $8,190,000$8,190,020 of the Purchase Price, and in turn, issued 8,190,0004,095,010 shares of common stock to Xinhua. No warrants have beenwere exercised by Xinhua.Xinhua and have expired.
On May 24, 2016 the Board of Directors approved a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-2 (the “Reverse Stock Split”). The Reverse Stock Split was effective on June 20, 2016 (the “Effective Date”). Simultaneously to the Reverse Stock Split, the number of shares of the Company’s authorized Common Stock was correspondingly reduced from 500,000,000 shares to 250,000,000 shares. On July 11, 2016, the Company received FINRA’s approval of the Reverse Stock Split. The Company has retroactively restated all shares and per share data for all the periods presented.
Results of Operations
Three MonthsFor the three months ended December 31,June 30, 2016 compared with the three months ended June 30, 2015 Compared with Three Months ended December 31, 2014
Gross Revenues
Revenues
The Company received saleshad revenues of $5,584$5,703 in the three months ended June 30, 2016 compared to $18,187 being generated in the three months ended June 30, 2015. The Company started to develop the China market in 2015 and therefore no significant revenue has been generated.
The decrease in revenue for the three months ended December 31, 2015June 30, 2016 as compared to $45,505 being generatedthe three months ended June 30, 2015 was due to promoting and selling its Moxian version 1.0 to local merchants in Malaysia and China. Moxian version 1.0 was then retired in September 2015. In the beginning of 2016, the Company commenced promoting the new version in the China market; hence there was a decrease in revenue for the three months ended December 31, 2014.June 30, 2016 as compared to the three months ended June 30, 2015.
Operating Expenses
OperatingSelling and general administrative expenses for the three months ended December 31,June 30, 2016 and 2015 were $1,139,803 and three months ended December 31, 2014 were $2,370,366 and $989,785,$1,241,022, respectively. The expenses consisted of filing fees, professional fees, research and development expenses, payroll and benefits and other general expenses. The selling and general administrative expense incurred for the three months ended June 30, 2016 was consistent from the same period of last year.
The research and development expenses for the three months ended June 30, 2016 and 2015 were $519,807 and $420,638, respectively. The increase in research and development expenses was because the Company hired more software developers in the three months ended June 30, 2016 for customizing the Moxian + applications in mainland China, which resulted in the increase in the research and development expense.
Depreciation and amortization expense for the three months period ended June 30, 2016 was $455,753, representing a significant increase from the depreciation and amortization expense of $238,048 incurred in the same period of last year. The increase in depreciation and amortization expense in the three months ended June 30, 2016 was due to more amortization expense on the software system capitalized in the beginning of fiscal 2016.
For the three months ended June 30, 2016, the Company recorded $1,264,700 impairment charge on intangible asset- IP rights based on the excess of the carrying value of the assets over the estimated fair value of the assets. There was no such impairment charge for the three months ended June 30, 2015.
The Company incurred an advertising agency fee of $462,430 with Xinhua New Media Culture Communication Co.,Ltd (“Xinhua”) for the three months ended June 30, 2016. The Company entered into an exclusive advertising agency agreement with Xinhua. Pursuant to the agreement, the Company, as an exclusive agent, is authorized to operate and sell advertisements on Xinhua’s mobile application in the gaming channel. The agreement expires on December 31, 2020. The Company believes the exclusive agency agreement with Xinhua will promote the Company’s Moxian mobile application version 2.0 in China market and generate more revenue on a long term basis.
26
We expect that our general and administrativeoperating expenses will continue to increase as we incur additional costs to support the growth of our business.
Net Loss
Net loss for the three months ended December 31,June 30, 2016 and 2015 was $3,852,653 and three months ended December 31, 2014, were ($2,804,228) and ($987,261),$1,916,140, respectively. Basic and diluted net income (loss) per share amounted ($0.01) and ($0.00) respectively for the three months ended December 31, 2015 and three months ended December 31, 2014.
The increase in net loss for the three months ended December 31, 2015 andJune 30, 2016 comparing to three months ended December 31, 2014June 30, 2015 was mainly due to an increase in generalresearch and administrative expenses.development, depreciation and amortization, intangible impairment charge and adverting agency fee expense as explained above.
For the nine months ended June 30, 2016 compared with the nine months ended June 30, 2015
Revenues
The Company had revenues of $18,645 in the nine months ended June 30, 2016 compared to $86,353 generated in the nine months ended June 30, 2015. The Company started to launch its new version of the APP in the China market in the beginning of 2016 and therefore no significant revenue has been generated.
Operating Expenses
Selling and general administrative expenses for the nine months ended June 30, 2016 and 2015 were $3,834,542 and $2,661,793, respectively. The expenses consisted of filing fees, professional fees, payroll and benefits and other general expenses. During the nine months ended June 30, 2016, the Company incurred additional approximately $0.4 million in marketing and consulting expenses to pursue a public offering during the nine months ended June 30, 2016, while the Company did not incur similar expenses for the same period of last year. The remaining increase was due to $0.3 million increase in professional and consulting fee, $0.1 million in salary and wages and $0.3 million increase in rental and property maintenance fee and $0.1 million increase in marketing and advertising expense. The Company is in the process of expanding in the China market, therefore the related operating expenses increased accordingly.
The research and development expenses for the nine months ended June 30, 2016 and 2015 were $2,034,103 and $936,624, respectively. The increase in the research and development expense was mainly due to the fact that more software developers were hired during the first half of fiscal 2016.
The Company incurred advertising agency fee of $462,430 with Xinhua for the nine months ended June 30, 2016. The Company entered into an exclusive advertising agency agreement with Xinhua. Pursuant to the agreement, the Company, as an exclusive agent, is authorized to operate and sell advertisement on Xinhua’s mobile application in the gaming channel. The agreement expires on December 31, 2020. The Company believes the exclusive agency agreement with Xinhua will promote the Company’s Moxian mobile application version 2.0 in China market and generate more revenue on long term basis.
Depreciation and amortization expense for the nine months ended June 30, 2016 was $1,356,306; it represents significant increase from $494,793 in the same period of last year. The increase in depreciation and amortization expense in the nine months ended June 30, 2016 was due to more amortization expense on the software system capitalized in the beginning of fiscal 2016.
For the nine months ended June 30, 2016, the Company recorded $1,264,700 impairment charge on intangible asset-IP right based on the excess of the carrying value of the assets over the estimated fair value of the assets. There was no such impairment charge for the nine months ended June 30, 2015.
We expect that our operating expenses will continue to increase as we incur additional costs to support the growth of our business.
Other Expenses
The Company recorded a $482,855 foreign exchange transaction loss during the nine months ended June 30, 2016 due to the conversion of the private placement funds, while the Company did not incur similar expenses for the same period of last year.
27
Net Loss
Net loss for the nine months ended June 30, 2016 and 2015 was $9,382,343 and $4,063,639, respectively. The increase in net loss for the nine months ended June 30, 2016 comparing to nine months ended June 30, 2015 was mainly due to reasons explained above.
Year ended September 30, 2015 Compared with Year ended September 30, 2014
Gross Revenues
The Company received sales revenues of $83,870 in the year ended September 30, 2015 compared to $56,122 being generated in the year ended September 30, 2014.
Operating Expenses
Operating expenses for the year ended September 30, 2015 and year ended September 30, 2014 were $5,443,815 and $2,176,963, respectively. The expenses consisted of our leases, R&D expenses, filing fees, professional fees, payroll and benefits and other general expenses.
We expect that our general and administrative expenses will continue to increase as we incur additional costs to support the growth of our business.
Net Profit/(Loss)
Net loss for the year ended September 30, 2015 and year ended September 30, 2014, were $6,173,646 and $4,791,342, respectively. Basic and diluted net loss per share amounted $0.03 and $0.02, respectively, for the year ended September 30, 2015 and year ended September 30, 2014.
The increase in net loss for the year ended September 30, 2015 compared to the year ended September 30, 2014 was due to an increase in general and administrative expenses.
Liquidity and Capital Resources
Cash Assets
At threeFor the nine months ended December 31,June 30, 2016 and 2015
As of June 30, 2016, we had working capital deficit of ($6,750,658)approximately $3.1 million consisting of cash on hand of $1,249,611$96,587 as compared to working capital deficit of ($4,089,365)approximately $4.1 million and cash on hand of $2,398,713approximately $2.4 million as of September 30, 2015.
Net cash used in operating activities for the threenine months ended December 31, 2015June 30, 2016 was ($1,473,735)approximately $5.9 million as compared to net cash used in operating activities of ($1,246,806) forapproximately $3.6 million or the threenine months ended December 31, 2014.June 30, 2015. The increase in cash used in operating activities arefor the nine months ended June 30, 2016 was mainly for filing fees, professional fees,due to approximately $0.4 million increases in the advertising agency fee expense and $1.1 million increase in research development and development expenses, payroll and benefitsselling and general expenses.
and administrative expense.
Net cash used in investing activities for the threenine months ended December 31, 2015June 30, 2016 was ($428,305)around $0.5 million as compared to ($20,109)approximately $1.3 million for the quarternine months ended December 31, 2014.
June 30, 2015. The higher spending for the nine months ended June 30, 2015 because the Company expanded its operations in China and purchased approximately $1.3 million in computer and office equipment, but the related purchase only amounted to approximately $0.3 million for the nine months ended June 30, 2016.
Net cash provided by financing activities for the threenine months ended December 31, 2015June 30, 2016 was $775,883approximately $4.1 million as compared to $418,931around $5.9 million for the threenine months ended December 31, 2014.June 30, 2015. During the nine months ended June 30, 2016, the Company completed a private placement of approximately $8.2 million, of which approximately $2.7 million was received during the nine months ended June 30, 2016 and around $5.5 million received by September 30, 2015.
We will require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital may come through various financing transactions or arrangements with third parties and may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in
28
locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.
For the years ended September 30, 2015 and 2014
Cash Assets
At year ended September 30, 2015, we had working capital deficit of $4,089,365, consisting of cash of $2,398,713 as compared to working capital deficit of $4,935,692 and cash of $1,770,196 as of September 30, 2014.
Net cash used in operating activities for the year ended September 30, 2015 was $5,417,273 as compared to net cash used in operating activities of $2,106,329 for the year ended September 30, 2014. The cash used in operating activities are mainly for our leases, R&D expenses, filing fees, professional fees, payroll and benefits and general expenses.
Net cash from/for investing activities for the year ended September 30, 2015 was that $3,286,593 was used for investing activity as compared to $667,730 was provided by investing activity for the year ended September 30, 2014. It was mainly because we used about $3 million to purchase office equipment and perform construction for leased offices (leasehold improvement).
Net cash provided by financing activities for the year ended September 30, 2015 was $9,236,028 as compared to $3,155,839 for the year ended September 30, 2015. The increase was mainly because we received $5.5 million investment from Xinhua in the year ended September 30, 2015.
During the fiscal year ended September 30, 2015, the burn rate for the Company was approximately $400,000 per month, consisting of cost of research and development, marketing, operation expenditures, and professional fees.
The Company anticipates utilizing approximately $450,000 monthly for capital expenditures during the fiscal year ended September 30, 2016, including approximately $250,000 for mobile application development and approximately $200,000 for other capital expenditures, including corporate facilities and infrastructure, information systems hardware, software and enhancements.
Financing
On June 4, 2015, the Company and Beijing Xinhua Huifeng Equity Investment Center (Limited Partnership) (“Xinhua”) entered into a subscription agreement, pursuant to which, the Company agreed to sell an aggregate of 8,169,0004,095,000 shares of the Company’s Common Stock at a per share price of $1.00$2.00 for gross proceeds of $8,190,000 (approximately RMB50,000,000) (the “Purchase Price”) and to issue to Xinhua for no additional consideration a warrant to purchase in the aggregate of 32,000,00016,000,000 shares of Common Stock at an exercise price of $2.00$4.00 per share, exercisable on or prior to July 31, 2015.
Under the subscription agreement, we are required to issue an additional number of shares of our common stock to Xinhua, equal to 50% of the aggregate number of shares issued upon exercise of the warrant by Xinhua as of September 30, 2016, if we fail to contract with 25,000 new paying merchants by September 30, 2016. This “make good” provision will be available only if Xinhua has exercised the warrant and acquired more than 16,000,000 shares of common stock. Further, we are required to issue 4,000,0002,000,000 shares of common stock to Xinhua, for no additional consideration, if we fail to publish its full working version of the Moxian mobile application version 2.0 by September 30, 2015, or if we fail to uplist to a national securities exchange in the U.S. by June 30, 2017.
Subsequent to the initial subscription agreement, the closing date of the transaction, as well as the expiration date of the warrant, were both first extended to September 30, 2015, and then further extended to December 31, 2015. As of the date of this prospectus, weWe received $8,190,000$8,190,020 of the Purchase Price, and in turn, issued 8,190,0004,095,010 shares of common stock to Xinhua. NoThe warrants were not exercised and have been exercised. For the fiscal year of 2016, the Company will likely require additional capital of $18 million to $20 million to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means, such as conducting a public offering of our common stock. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.expired.
Loan
As of December 31, 2015,June 30, 2016, the Company borrowed loans from certain thirdrelated parties and shareholders of the Company for an aggregate of $2,205,299.
$2,839,158.
As of September 30, 2015, the Company borrowed loans from certain thirdrelated parties and shareholders of the Company for an aggregate of $1,462,525.
29
Foreign Operations
Substantially all of our business operations are conducted in Mainland China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in the PRC. We also have operations in Hong Kong. Operating in foreign countries involves substantial risk. For example, our business activities subject us to a number of Chinese laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and security requirements, labor laws, intellectual property laws, privacy laws, and anti-competition regulations, which have uncertainties. Any failure to comply with the PRC laws and regulations could subject us to fines and penalties, make it more difficult or impossible to do business in China and harm our reputation.
Operating in foreign countries also subjects us to risk from currency fluctuations. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar denominated sales and operating expenses. The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of our foreign currency-denominated sales and earnings. This could either reduce the U.S. dollar value of our prices or, if we raise prices in the local currency, it could reduce the overall demand for our offerings. Either could adversely affect our revenue. Conversely, a rise in the price of local currencies relative to the U.S. dollar could adversely impact our profitability because it would increase our costs denominated in those currencies, thus adversely affecting gross margins.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation and the fair value of our stock, stock-based compensation, debt discount and the valuation allowance relating to the Company’s deferred tax assets.
Recently Issued Accounting Pronouncements
Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the Financial Statements included in this Report for information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
30
OUR HISTORY AND CORPORATE STRUCTURE
The following diagram illustrates our corporate structure as of the date of this prospectus.
Moxian was incorporated in the State of Nevada on October 12, 2010 under the name SECURE NetCheckIn Inc. On July 29, 2015, we changed our name to Moxian, Inc. Previously we were engaged in the business of offering a cloud-based scheduling and notification product targeted to urgent care facilities and medical offices to increase the satisfaction of patients in the scheduling and timing of appointments.
On February 21, 2014, through Moxian CN Samoa, we acquired Moxian BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen, and Moxian Malaysia, from Rebel Group, Inc. (“REBL”,REBL,” formerly known as Moxian Group Holdings, Inc.), a company Moxian CN Group was incorporated by the Company under the laws of which our Chief Executive Officer, James Mengdong Tan, is a founder.
Independent State of Samoa on February 17, 2014.
Moxian BVI is a British Virgin Islands company that was incorporated on July 3, 2012. Moxian HK was incorporated on January 18, 2013, under the laws of Hong Kong. Moxian HK is currently engaged in the business of online social media and plans to launch its business in China. Hong Kong.
Moxian Shenzhen was incorporated on April 8, 2013 in China and is engaged in the business of internet technology, computer software, and commercial information consulting. Moxian Malaysia was incorporated on March 1, 2013 and conducts its business in the IT Services and Media Advertising industries.
Prior to the acquisition of Moxian BVI, on February 19, 2014, Moxian HK and Moxian Shenzhen entered into an Assignment and Assumption Agreement with Moxian IP Samoa, a wholly-owned subsidiary of REBL at the time, whereby Moxian HK and Moxian Shenzhen assigned and transferred to Moxian IP Samoa, all of the intellectual property rights relating to the operation, use and marketing of the Moxian Platform, including all of the relevant trademarks, patents and copyrights, in consideration of $1,000,000. Subsequently on January 30, 2015, we acquired from REBL 100% of the equity interests of Moxian IP Samoa for $6,782,000. As a result of the transaction, Moxian IP Samoa became our wholly-owned subsidiary. Moxian IP Samoa was incorporated on February 17, 2014 in the Independent State of Samoa.
31
On July 15, 2014, Moxian Shenzhen entered into a series of contractual arrangements with Moyi, which provide Moxian Shenzhen with control over Moyi’s business affairs and economic interest, as described in more details below. Moyi was incorporated on July 19, 2013 in China.
On December 10, 2015, Moxian Shenzhen incorporated Moxian Beijing and Moxian Beijing became the wholly-owned subsidiary of Moxian Shenzhen.
Contractual Arrangements with Moyi and its Shareholders
Due to PRC legal restrictions on foreign ownership and investment in, among other areas, Internet information services, which include online advertisement and e-commerce, we, similar to all other entities with foreign-incorporated holding company structures operating in our industry in China, operate our businesses in which foreign investment is restricted or prohibited in the PRC through a wholly-foreign owned enterprise and a variable interest entity. The variable interest entity, Moyi, which is incorporated in the PRC and 100% owned by two PRC nationals, Zhang Guohui and Guan Fensheng (“Moyi Shareholders”), holds the required Internet Content Provider license, or ICP license and operate our businesses in China.
We have entered into certain contractual arrangements, as described in more detail below, which collectively enable us to exercise effective control over the variable interest entity and realize substantially all of the economic risks and benefits arising from, the variable interest entity. As a result, we include the financial results of the variable interest entity in our consolidated financial statements in accordance with U.S. GAAP as if it was our wholly-owned subsidiary.
The following is a summary of the contractual arrangements that provide us with effective control of our variable interest entity and that enable us to receive substantially all of the economic benefits from its operation.
Exclusive Business Cooperation Agreement. Pursuant to the Exclusive Business Cooperation Agreement dated July 15, 2014, between Moxian Shenzhen and Moyi, Moxian Shenzhen exclusively provides Moyi with services, including, technical and systems support, marketing consultancy, product research and development, equipment leasing and system maintenance. In return, Moyi pays a service fee to Moxian Shenzhen in an amount equal to 100% Moyi’s pre-tax profit. Under the agreement, Moxian Shenzhen has an option to purchase from Moyi any or all of its assets, at the lowest price permitted under the PRC laws. The initial term of this agreement is 10 years, which may be renewed by Moxian Shenzhen in its sole discretion. The agreement may be terminated, by Moxian Shenzhen with a 30-day written notice, or by Moyi only if Moxian Shenzhen engages in grossly negligent or fraudulent conducts.
Exclusive Option Agreement. Pursuant to the Exclusive Option Agreement dated July 15, 2014, among Moxian Shenzhen, Moyi and Moyi Shareholders, Moxian Shenzhen or its designee has an exclusive option to purchase from the Moyi Shareholders, to the extent permitted under the laws of the PRC, all or a portion of their equity interest in Moyi, on one or more occasions, at the price of RMB 10 (or approximately $1.62) per share, or such other price based on an appraisal if such appraisal is required by the laws of PRC. Moyi and its shareholders also agreed that, no person, other than Moxian Shenzhen and its designee, has the right to purchase any of the equity interest of Moyi. Moyi and the Moyi SharesShareholders undertake not to effect major corporate changes, including, amending its articles of association or bylaws, changing its registered capital, declaring dividends, or enter into any major transaction in relation to Moyi, including, the transfer of any of its business, material assets, or equity interests to any third party, incurring debts other than in the ordinary course of business, executing any major contract, or making investments in or acquiring a third party, without the prior written approval of Moxian Shenzhen. The initial term of this agreement is 10 years, which may be renewed by Moxian Shenzhen in its sole discretion.
Loan Agreement. Pursuant to the Loan Agreement dated July 15, 2014, by and among Moxian Shenzhen and Moyi Shareholders, Moxian Shenzhen granted an interest-free loan in the principal amount of RMB 100,000 (or approximately $15,198) to Moyi Shareholders, which may only be used for the purposes of Moyi’s business operation. The loan has a 10-year term, but Moxian Shenzhen may require acceleration of repayment at its absolute discretion with a 30-day notice. Moxian Shenzhen will choose the form of the repayment, which, among others, may be the proceeds that Moyi Shareholders receive from selling their equity interest in Moyi to Moxian Shenzhen, pursuant to the Exclusive Option Agreement described above.
Equity Pledge Agreement. Pursuant to the Share Pledge Agreement dated July 15, 2014, among Moxian Shenzhen and Moyi Shareholders, Moyi Shareholders pledged all of their equity interests in Moyi to Moxian
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Shenzhen, to secure the performance of obligations by themselves and Moyi under the agreements described above. Under this agreement, Moyi Shareholders may not transfer or dispose of their equity interest in Moyi, without Moxian Shenzhen’s prior written consent. The equity pledge agreement has not yet been been registered with the relevant office of the Administration for Industry and Commerce in China.
Power of Attorney. Pursuant to the Powers of Attorney dated July 15, 2014, Moyi Shareholders respectively granted irrevocable authority to Moxian Shenzhen, to exercise all their rights as a shareholder of Moyi, including the right to attend and vote at shareholders’ meetings and appoint directors. Moyi Shareholders also authorized Moxian Shenzhen to take necessary actions, on their behalf, to effect the transactions contemplated by the Equity Pledge Agreement and Exclusive Option Agreement. Moyi Shareholders agreed not to grant the same authority under the Powers of Attorney to any other person, without Moxian Shenzhen’s prior written consent.
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BUSINESS
BUSINESS
Overview
We are in the O2O (“Online-to-Offline”) business. With respect to our business, O2O means providing an online platform for small and medium sized enterprises (“SMEs”) with brick“brick and mortarmortar” businesses that allows them to conduct business, interact with existing customers and obtain new customers online. We refer to our customers as “Merchant Clients” and we use the term “Users,” to refer to those existing and potential customers of our Merchant Clients who use our mobile application and platform. Through the features, products and services offered inon our platform, we seek to create interactioninteractions between Users and Merchant Clients, which allowswill allow Merchant Clients to study consumer behavior. Our platform has five main components and allowsthat allow Merchant Clients to conduct targeted advertising campaigns and promotions, which we believe are effective because they are geared to the customers that a Merchant Client wishes to attract. Our platform is also designed and built to encourage Users to return and refer new Users, each of which is a potential customer for our Merchant Clients.
The current version of our platform is called “Moxian+,” which consists of our user mobile application (the “App” and collectively, the “Apps”) called the Moxian+ User App and a separate App for our Merchant Clients called the Moxian+ Business App. Both versions of the App are currently available in the Google Play Store and the Apple App Store. There is no charge to download either App. We also have a website that can be accessed atwww.moxian.com where either App can also be downloaded.
Moxian principally operates in mainland China with its headquarters in Shenzhen, China. We launched Moxian version 1.0 in Malaysia in June 2013 and subsequently in China in July 2014. In 2015, we developed the Apps as part of “Moxian+,” the successor to Moxian version 1.0 which was officially launched in October 2015 in China.
Market Opportunities
China currently has more than 850 million users actively utilizing mobile applications (http:(http://news.xinhuanet.com/english/2015-11/10/c_134802668.htm)c_134802668.htm). In 2014, the China Internet Network Information Center reported that there were approximately 618 million internet users throughout Asian countries, representing a penetration rate of approximately 46 percent. Among these internet users, over 90 percent have a social media account. For comparison, just 67 percent of U.S. internet users engage in social media. However, the opportunity in China extends beyond the ability to reach a large target audience. According to the Data Center of China Internet, 38 percent of users claim they are more likely to buy items recommended by other social media users (Statistical Report on Internet Development in China by China Internet Network Information Center, 2014).
O2O platforms serve to substantially enhance marketing and commerce performance for brands and retailers compared to traditional digital marketing approaches. O2O refers to any and all activities that originate online and eventually result in a shopper going to a physical store. Forrester Research predicts that by 2016, more than half of the $3.5 trillion spent in offline US retail will be influenced by the websites (Forrester’s US Cross-Channel Retail Forecast, 2011 To 2016).
The O2O platform model has been recognized as a trillion dollar opportunity (http://techcrunch.com/2010/08/07/why-online2offline-commerce-is-a-trillion-dollar-opportunity/). According to official statistics, China’s O2O market reached 98.7 billion yuan (approximately US$9 billion) in 2011. Industry analysts anticipate that the China O2O market will quadruple to 418 billion yuan (approximately US$67 billion) in 2016 (http:(http://www.prnewswire.com/news-releases/chinas-o2o-market-the-path-to-success-is-not-uni-directional-201906281.html)chinas-o2o-market-the-path-to-success-is-not-uni-directional-201906281.html). Moxian isbelieves it will be able to capture a share in this market by offering its platform to merchants. Our platform allows users to be aware of their interested merchants’ on-going promotions so as to attract them to make purchases offline.
Products and Services
Subscription Packages for Moxian+ Business App Merchant Clients
The Moxian+ Business App is solely for the use ofby Merchant Clients, whichClients. Moxian+ Business App allows them to manage their presence within the Moxian+ platform, plan a campaign, offer discounts, manage payments and receive analytics. We offer free and paid subscription packages to our Merchant Clients usinguse the Moxian+ Business App. We have three
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subscription levels. Our basic account is free, our gold account is $1200$1,200 per year and our diamond account is offered at $2,000 per year.
With a basic account subscription, Merchant Clients get a “Do It Yourself” webpage and it hasthey can use different modules intoin their account, including the business address, of the business the phone number of the business, and a listing oflist up to 5 products that they can offer for sale through our e-commerce feature .feature. The following benefits are available to Merchant Clients that have a basic account features:.account:
• A webpage to create an online shop
• Ability to interact with customers through MO-Talk, a voice chat service • Receive basic analytics reports •Provide rewards to Users |
When a Merchant Client purchases one of our paid subscription packages, in addition to the features provided in the basic account, subscription package, Merchant Clients also have access to a more extensive set of tools on our platform, which allows them to
•Send out messages to targeted customers | ||
• Receive more detailed analytics reports
• Social Customer Relationship Management (‘SCRM’)
• Fan rewards
• Events Hosting
• Vouchers and Product Listing
• Features for multiple store locations
Moxian+ User App for Users
Our Users are referred to as “MO-Pals” within the User App. They can download and use the User App for free. Users provide basic information to sign up for a Moxian+ account and then they can invite friends and family members to join Moxian+, search and join different interest groups, and participate in social media such asby sharing activities, stories, photos and videos, sendsending micro-blog messages, playplaying online games in Moxian+’s game center, and earnearning MO-Coins, a virtual currency similar to credit card reward points which are explained further below.
The Moxian+ User App has a variety of features to attract and retain Users. The Moxian+ User App also provides access to a social media platform with a package of services to provide interaction with other Users and Merchant Clients.
•Interact with other Users through MO-Talk; | ||
• News Center with daily news items under “Hot Topics,” “Hot Events” and “Nearby People;”
• Game Center to earn MO-Points;
• Shop at Merchants’ Online Stores by credit card or MO-Coins; and
• MO-Shake allows Users to shake their phone to win: vouchers; MO-Coins or MO-Points; and coupons, discounts or admission to other events hosted by Merchant Clients which are in the vicinity of the User.
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Services for Merchant Clients
Social Customer Relationship Management (‘SCRM’)
Our SCRM is built to allow Merchant Clients to input their customer details into the system. The SCRM can then follow the customers’ activities and allows Merchant Clients to send the promotional messages and advertisements to Users through our platform.
Targeted Marketing
Our Targeted Marketing tool is offered to paid Merchant Clients only. Its feature allows our Merchant Clients to contact their targeted Users directly by sending messages, promotions and vouchers to a specific range of customers, such as customers who have visited their store in the past week or month or customers who have upcoming birthdays. Merchant Clients can send Users discounts or messages and target people by age, gender or other criteria..criteria. We also provide targeted marketing to assist Merchant Clients to reach customers more efficiently. For example, we can generate a list of customers who have browsed a Merchant Client’s products over the past two months more than once, but not made a purchase, and a discount can be offered to them for certain products. In addition, Merchants Clients can find Users near their physical shops (within 1,000 meters) and invite them to their storesstores.
Analytics Reports
Detailed reports are provided to paid Merchant Clients. These reports allow Merchant Clients to see the number of followers they have, the number of points redeemed and rewarded, and the number of vouchers purchased or redeemed offline. Merchant Clients with a free account receive only basic analytics, such as how many MO-points have been distributed. However, for paid accounts, Merchant Clients receive more detailed analytics regarding the buying patterns and likes of current and potential customers.
Merchant Clients can provide rewards to customers by including their customer’s mobile number. Customers who have installed the Moxian+ User App can then receive rewards on the platform in the form of MO-Points or discount vouchers. Customers who do not have the Moxian+ User App installed will receive a text message informing them of their rewards and that they can download the Moxian+ User App to redeem them.
Event Hosting
Merchant Clients can host events through the platform and invite Users within a selected range, such as by proximity, common interest, or gender to participate in the event.
Vouchers and Product Listings
Merchant Clients can customize coupons or vouchers on the platform, daily or with whatever frequency they wish, or list available products.
Multiple store features
For those Merchant Clients which have multiple stores in different locations, our platform allows different stores to access to the same account. Moreover, different stores may be differentiated for which information they can access to by entering their location in the app.
Webpage to Create an Online Shop
We provide a Do it Yourself Webpage to create an online shop. The Merchant Client can include its logo, its product/service category, telephone number, and other information that is relevant to the business. The Shop will appear in the Moxian+ User App. A Merchant Client can manage its own shop by adding more information, posting events, offers, discountsand discounts.
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Our Platform
There are five components to our Moxian+ platform, which is the backend of our application. The Moxian+ platform includes the social media engine, the e-commerce engine, the rewards engine, the gamification engine, and the analytical engine.
Social Media Engine
Our data use policy governs the use of information that users have chosen to share and present. We also design our products to include robust safety tools. These tools are coupled with partnerships with online safety experts to offer protection for all users, particularly teenagers. We work with law enforcement to help promote the safety of our users as required by law. To the extent permissible, and with prior consent from the Users, we analyze User’s information to understand the Users behavior.
E-Commerce
Utilizing our e-commerce features, Merchant Clients are able to conduct business by posting products, offering coupons and sales as well as creating events and blogs through the Moxian+ Business App. On the other hand, Users can shop at the Merchant Clients’ shops like at any other e-commerce platform by ordering online and receiving the products by express delivery.
Rewards
Users are rewarded with MO-Points and MO-Coins. MO-Points are points granted to Users when they shop at Merchant Clients, play games on our platform or engage in other activities sponsored by the Merchant Clients. MO-Points can be redeemed at the Merchant Clients’ shops as determined by the Merchant Clients, or can be redeemed for MO-Coins which are virtual currency and can be used at any Merchant Client’s stores. MO-Coins are backed by cash paid by Merchant Clients which is held in an escrow account. They can be redeemed for cash, or used to purchase more MO-Points. The ratio of MO-Coins to actual currency is currently set at 10:1:1. A Merchant Client who pays for MO-Coins can also redeem them for cash.
MO-Points and MO-Coins are traceable and trackable on the Moxian+ platform through designated serial number so that we can see exactly what Users do with them and use that information to assist our Merchant Clients to determine customer behaviors
behaviors.
From time to time, we may also give away MO-Points or MO-Coins as a promotion to increase our User base. We also plan to have our own “shopping mall” with merchandise that Users can purchase with MO-Points and MO-Coins in the upcoming year.
Gamification
Together with outside contractors we develop games for Users to earn MO-Points and MO-Coins and other rewards which may be specific to a certain Merchant Client. Users can use MO-Points to play games offered in our game center.
Analytical Engine
Moxian provides analytics to each Merchant Client for the consumer behavior Moxian learns through its platform to assist our Merchant Clients to better design their promotions and reach their target audience. We analyze consumer behavior through ‘likes’ and ‘dislikes’ of posts by certain merchants or the places they tend to “check-in” to, to determine their usual hang out.
News Center
On “Hot Topics,” the most popular topics and related blogs, news, and journals being discussed among Users will be displayed, so that Users can stay informed in real time. “Hot Events” provide information about events to be hosted by Merchant Clients, and they are categorized by different interests. In addition, Users will be able to see the list of other nearby Users, with information that a User may be willing to have displayed.
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Advertisements
On January 20, 2016, the Company entered into an Exclusive Partnership Agreement with Xinhua New Media Culture Communication Co. Ltd. (“Xinhua New Media”), pursuant to which the Company is engaged as the reseller of the advertisement space for the Xinhua New Media App.
The Company plans to expand its sales force to include an advertisement sales team to promote the Xinhua New Media App advertisement space. In addition to selling the Xinhua Advertisement space, the sales team will also be selling our own advertisement space on Moxian platform.
We believe that we will benefit from the partnership with Xinhua New Media in two ways:
Firstly, Traction and growth of users. Users of the Xinhua New Media App will be rewarded with Mo-Coins and Mo-Points when engaging in interactive activities, such as clicking on any advertisements, within the platform. These Xinhua New Media App users are expected to then log into Moxian Platform to redeem their Mo-Coins and Mo-Points. This will allow us to grow our user base.
Secondly, Cross-Selling. We will bundle our Moxian+ Merchant App with the advertisement space on the Xinhua New Media App and offer a package deal to merchants. The package deals will only be offered to large-scale customers who have chain-shops based in China.
In addition, we are also the exclusive operator and partner for the gaming platform included in the Xinhua New Media App. Moxian charges a fee for operating the gaming platform, which generate revenues from advertisement, sponsorship and profit sharing arrangements with gaming companies.
Transaction Fees
All transactions carried across our platform is done through our virtual currency. We charge a fee for any transaction carried on our platform within a range of 3% to 5% of the transaction price.
White-Label Solution
We offer large scale merchants the option to “white label” our Moxian+ Merchant and User App. We charge a yearly fee to the merchants. White-label merchants sell Moxian+ Merchant and User App in their own names. We also offer customization of Moxian+ Merchant and User App at the request of merchants for an additional fee.
Marketing Strategy
Our success is dependent upon signing up paid Merchant Clients. The Merchant Clients, in turn, build up our base of Users by encouraging their customers to download our User App. Merchant Clients can offer MO-Points and MO-Coins to attract people to download our App. In order to attract more Merchant Clients, we also need to have an established base of Users.
We initially marketed only to merchants in Shenzhen, China where we launched Moxian version 1.0. Although this was a beta test we hadthat ran for three months from June 2015 to August 2015, 30,000 merchants subscribesubscribed for our Moxian version 1.0 services. We are currently targeting these same merchants for Moxian+ and expanding the user base.
Userbase.
We have a sales force of 20 people based in Shenzhen, China. By the end of 2016, we intend to open an additional sales office in Shanghai and Guangzhou and hire a sales force of 200 sales people in four operating cities.
We are currently scheduling seasonal sales events in Shenzhen to promote our products and services to our initial Merchant Clients and give away MO-Points and MO-Coins.
During 2016, we also plan to utilize third party distributors with an existing base of merchants to market our products.
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Competition
Although major global social network platform providers have the advantage of an existing user base, we believe Moxian has a unique social business model and social media features that can enable us to stand out among the competition. Other major social networking platforms usually focus on personal photo sharing, video sharing, chat features, group chatting, micro-blogging, following groups’ online activities, rating and commenting on products and services. What we believe makes Moxian stand out is that our Merchant Clients have: (i) their own promotion pages, (ii) local event programs for their customer Users, (iii) location-based promotion information, (iv) mobile chat applications, (v) give-away free prizes for the Users, (vi) advertising on Moxian’s social pages, (vii) a social customer relationship management systems, (viii) a loyalty program using MO-Points and MO-Coins, and (ix) customized online games to promote merchants’ brands and group sales promotions. Therefore, by establishing our Merchant Client base first, we believe that our user acquisition will be easyeasier to build up.
In China, we face stiff competition. Our major competitor in China is Dazong Dianping (“Dianping”). Dianping targets merchant clients as we do. In addition, Dianping also offers merchants a customized page, location based promotion information and a relationship management tool. The other principal competitors are Nuomi, Meituan and WeChat.
However, we believe Moxian+ is superior for SMEs because our SCRM offers Merchant Clients the ability to interact with their customers via instant messenger. In addition, we offer virtual currencies that can entice and encourage repeated visits by the Users.
Our Technology
Technology is the key to our success in achieving efficiency for our business, improving the user experience and enabling innovation. We employ a team of over 80 engineering and data analytics personnel to build our technology platform and develop new online and mobile products. Key components of our technology include:
Data Science
Our data science technology serves various types of data-intensive computational needs, including deep learning, high-volume batch processing and multi-variable and multi-dimensional real-time analytics. Data mining and transaction, payment and behavioral data science capabilities are used extensively in numerous applications such as search and online marketing.
Security
We take various steps to ensure the security of the Moxian+ platform and the personal information of users of the platform, as well as the ecommerce transactions conducted on the platform. We conduct daily testing and have engaged an outside security consultant to conduct further testing and make recommendations as to additional security measures.
Research and Development
There are 12060 people in the Research & Development department, which is responsible for developing and improving the mobile application, Moxian platform and customer experience in using our products. During the past two fiscal years, we have spent approximately $1,735,704 in 2014 and $4,355,052 in 2015, respectively on research and development.
Employees
We have over 170a total of 160 employees, with 12 in managerial positions, 35of which we have 21 employees in the product team, 60 employees in the research and development team, 26 employees in the sales and marketing department, 17 employees in the customer and technical department, 10 workingsupport team and the remaining in the administrative department and over 120 people working in our sales and marketing department. We consider our employee relations to be good, and to date have not experienced a work stoppage due to a labor dispute.
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Intellectual Property
Trademarks
We have registered for the following trademarks:
Mark |
We have applied to register the following trademarks:
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